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UNIVERSITY      OF       ILLINOIS       BULLETIN 
VOL.    X  MARCH  10,   1913  NO.   24 

[Re-entry  at  Urbana,  111.,  as  second-class  matter  under  Act  of  Congress 
of  July  16,  1894,  pending.] 


UNIVERSITY  OF  ILLINOIS  STUDIES 

IN  THE 

SOCIAL  SCIENCES 

VOL.    II.      NO.      I  MARCH,    J913 


Taxation  of  Corporations  in  Illinois 

OTHER  THAN  RAILROADS,  SINCE  1872 


BY 


JOEL  ROSCOE  MOORE,  A.M. 


PRICE  55  CENTS 


URBAN A-CHAMPAIG.S*,   ILLINOIS 

PUBLISHED  BY  THE  UNIVERSITY 

1913  .flSCA20ED 


JOLU1987 

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Vol. 

•icraft,  II.  L. 

4.    1002. 

Gordon,  J.   II. 


UNIVERSITY  OF  ILLINOIS  STUDIES 

IN  THE 

SOCIAL  SCIENCES 

VOL..    II.       NO.       I  MARCH,    1913 


Taxation  of  Corporations  in  Illinois 

OTHER  THAN  RAILROADS,  SINCE  1872 


BY 


JOEL  ROSCOE  MOORE,  A.M. 


PRISE   S3   CENTS 


URBANA-CHAMPAIGN,   ILLINOIS 

PUBLISHED  BY  THE  UNIVERSITY 
1913 


COPYRIGHT,  1913 
BY  THE  UNIVERSITY  OF  ILLINOIS 


PREFACE 

This  is  a  study  of  the  taxation  of  corporations  in  Illi- 
nois, other  than  railroads,  since  1872.  It  considers  chiefly 
those  features  of  the  state  and  local  taxing  methods  that 
have  been  designed  especially  for  taxing  the  intangible 
property  of  corporations. 

Detailed  exposition  of  the  taxing  of  corporations 
under  the  provisions  of  the  general  property  tax,  is  not 
attempted;  the  general  property  tax  is  a  large  study  in 
itself.  The  same  policy  has  been  followed  in  regard  to  spe- 
cial taxes  on  corporations.  Railroad  taxes  are  excluded 
also  because  they  require  a  lengthy  separate  study;  and 
any  general  statement  in  these  pages,  may  or  may  not 
apply  to  railroad  corporations.  Eighteen  hundred  seventy- 
two  is  the  date  selected  for  the  beginning  of  this  study  be- 
cause under  the  new  constitution  adopted  in  1870,  the 
general  assembly  in  that  year  enacted  the  general  revenue 
law  which  in  its  main  features  has  remained  unchanged 
to  the  present. 

This  study  was  made  in  1909 ;  but  has  been  edited  and 
revised  to  include  changes  in  the  revenue  law  and  data 
since  that  time. 


CONTENTS 


CHAPTER  I. 

INTRODUCTION,  AND  BRIEF  ANALYSIS  OF  CORPORATION  TAXES  IN  ILLINOIS..  5 

CHAPTER  II. 

THE  STATE  BOARD  OF  EQUALIZATION  RELATIVE  TO  "CORPORATE  EXCESS" 
METHOD  OF  ASSESSMENT 17 

CHAPTER  III. 

COLLECTION   OF  CORPORATION   TAXES:     "CORPORATE  EXCESS"  METHOD 
TESTED  IN  COURTS 47 

CHAPTER  IV. 

METHODS  OF  ASSESSMENT  OF  CORPORATIONS  EXEMPT  FROM  "CORPORATE 
EXCESS  "METHOD 54 

CHAPTER  V. 

LICENSE  AND  EXAMINATION  FEES  AND  "RECIPROCAL"  TAXES 73 

CHAPTER  VI. 

OBSERVATIONS  AND  DEDUCTIONS 92 

BIBLIOGRAPHY  106 

INDEX  107 


CHAPTER  I. 

INTRODUCTION  AND  BRIEF  ANALYSIS  OF  CORPORATION  TAXES 

IN  ILLINOIS. 

Business  organization  in  Illinois,  as  in  other  states, 
has  long  been  predominantly  that  of  the  corporation. 
Every  year  of  the  last  forty  years,  the  period  under  exami- 
nation, has  seen  a  larger  number  of  business  enterprises 
adopting  the  methods  of  investment,  management  and  lia- 
bility peculiar  to  the  corporation.  Greater  and  greater 
amounts  of  property  have  been  taking  a  more  or  less  in- 
tangible form.  Some  of  these  forms  are  stocks,  bonds, 
leases,  franchises  and  good  will. 

This  intangible  form  of  property  defies  the  most  assid- 
uous efforts  of  the  local  assessor  to  value  it  properly1  under 
the  head  of  real  estate  and  personalty.-  This  is  not  neces- 
sarily because  of  obstructions  placed  in  his  way  by  the 
corporation,  as  a  person  seeking  to  evade  proper  assess- 
ment, though  too  often  such  may  be  the  case;  but  it  is 
largely  due  to  an  inherent  defect  in  the  system  of  taxing 
on  a  general  property  valuation,  namely,  that  the  system 
was  not  devised  so  as  to  reach  intangible  values,  (or  "in- 
visible value",  as  denominated  by  a  certain  prominent 
Chicago  corporation.2)  Our  New  England  forefathers 
adopted  the  general  property  tax  at  a  time  when  the  mod- 
ern business  corporation  was  practically  non-existent, 
when  a  person's  ability  to  pay  taxes  could  be  quite  accur- 
ately determined  by  the  amount  of  his  real  estate  and  per- 
sonal property.  Both  were  intimately  associated  with  his 
person  and  were  in  a  form  that  could  be  seen  and  valued  by 
the  assessor.  But  the  corporate  person  of  to-day  as  a  busi- 

1  Argued  by  corporation  that  it  is  practically  impossible  to  value  fran- 
chise. Porter  et  al  vs.  R.  R.  I.  &  St.  L.  R.  R.  Co.,  76  111.  561  (1875). 

2Chicago  Chamber  of  Commerce,  letter  to  State  Board  of  Equalization, 
seeking  to  justify  its  refusal  to  return  statement  of  capital  stock  value. 
Proceedings  State  Board  of  Equalization,  1873,  p.  17. 

5 


6  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [6 

ness  unit  often  controls  real  estate  whose  value  to  the 
corporation  is,  for  the  assessor,  very  difficult  to  determine.3 
Secondly,  as  a  business  unit,  the  corporation  very  often 
controls  personal  property  in  the  shape  of  stocks,  bonds, 
franchises  and  good  will,4  the  values  of  which  to  the  cor- 
poration it  is  practically  impossible  for  the  assessor  to 
determine. 

This  defect  in  the  general  property  method  whereby 
corporations  escape  proper  assessment  has  long  been  recog- 
nized in  American  states,  especially  the  older  ones. 
Several  of  the  Commonwealths  have  gone  so  far  toward 
correcting  it  as  to  put  corporation  taxes  into  a  separate 
system.5  In  Illinois  the  defect  became  a  matter  of  admin- 
istrative and  constitutional  concern  a  few  years  prior  to 
and  at  the  time  of  the  framing  of  the  constitution  of  1870. 
Evidence  on  this  point  may  be  found  in  the  records  of  the 
State  Board  of  Equalization  in  1867,°  and  in  the  records 
of  the  debates  in  the  Constitutional  Convention  of  1869.7 
But  while,  perhaps,under  the  present  constitution,  of  1870, 
a  separate  system  might  have  been  devised  for  taxing  cor- 
porations in  Illinois,8  none  has,  as  yet,  been  devised  by  the 
legislature. 

However,  something  has  been  done  toward  remedying 
the  defect,  above  discussed,  in  the  assessment  of  intangible 
property  of  corporations.  In  1872  the  legislature  enacted 
a  new  revenue  law,  which  modified  the  system  of  assess- 
ment in  regard  to  the  property  of  corporations  organized 
under  the  laws  of  Illinois. 

In  taking  up  the  analysis  of  corporation  taxes  under 

*E.g.  road-bed,  mines,  timber  lands  and  wharf,  dock  and  elevator  sites. 

*Monopoly  of  organization  and  services  might  be  added. 

6E.g.,  New  York,  Massachusetts,  New  Jersey,  Pennsylvania. 

^Proceedings  State  Board  of  Equalisation,  1867,  pp.  37-38,  58-59. 

7Debates  and  Proceedings  of  Constitutional  Convention,  pp.  211,  263. 

8The  proposal  of  the  Revenue  Commission  of  1885-6  assumes  as  much. 
Also,  so  argued  by  Gov.  Oglesby.  Rep.  to  Assembly,  1887,  vol.  I,  p.  I3A. 
See  also  opinion  Sup.  Ct.,  Raymond  vs.  Hartford  Fire  Ins.  Co.,  196  111. 
329  (1902)  obiter. 


7]  INTRODUCTION  7 

the  system  established  since  1872,  it  will  be  well  first  to 
define  them.  In  the  words  of  Professor  Seligman,  "Taxa- 
tion of  the  corporation  does  not  mean  taxation  of  the  secur- 
ity holder  who  has  purchased  the  stock  or  bond  from  the 
original  owner."9  It  has  been  argued  that  the  taxation  of 
the  shares  of  stock  in  the  hands  of  stockholders  is  also  a 
tax  upon  the  corporation,  and  that  the  shareholders,  not 
the  corporation,  own  the  properties  of  the  corporation; 
but  in  denial  of  this,  it  has  been  held  by  the  Courts  of  Illi- 
nois, of  the  United  States  and  of  England,  that  the  proper- 
ty of  the  shareholders  in  a  corporation  is  quite  distinct 
from  that  of  the  corporation.10  Evidently  then  Professor 
Seligman's  definition  of  what  is  not  a  corporation  tax,  has 
found  standing  in  jurisprudence.  In  a  positive  way,  cor- 
poration taxes  may  be  defined  as  those  taxes  which  the 
corporation  as  a  person,  through  its  officers,  must  pay  to 
the  governments,  local,  state  and  national.  This  definition 
may  be  further  extended  in  the  words  of  the  Supreme  Court 
in  1876 : 

It  has  been  held  that  a  corporation  is  possessed  of  three  kinds  of 
property  subject  to  taxation:  i.  capital  stock;  2..  corporate  property; 
3.  franchise.11 

The  Justice  in  reinforcing  the  Court's  opinion  cites  a 
similar  opinion  of  the  United  States  Supreme  Court.12  In 
the  same  year,  1876,  the  United  States  Supreme  Court,  in 
a  corporation  tax  case,  arising  under  the  present  Illinois 
law,  the  law  of  1872,  spoke  as  follows : 

That  the  franchise,  capital  stock,  business,  and  profits  of  all  corpora- 
tions are  liable  to  taxation  in  the  place  where  they  do  business,  and  by 
the  State  which  creates  them,  admits  of  no  dispute  at  this  day.13 

^Pending  Problems  in  Public  Finance.    Pamphlet,  1904. 

10Porter  vs.  R.  R.  I.  &  St.  L.  R.  R.  Co.,  76  111.  561  (1875),  citing  opinion 
of  U.  S.  Sup.  Ct.  1865,  "The  tax  on  shares  is  not  a  tax  on  the  banks", 
Van  Allen  vs.  The  Assessors,  3  Wallace  583  (1865),  citing  opinion  of  Lord 
Denman  in  case  of  Queen  vs.  Arnand  (9  Adolphus  &  Ellis,  N.  S.  806). 

"Ottawa  Glass  Co.  vs.  McCaleb,  81  111.  556  (1876). 

12Gordon  vs.  The  Appeal  Tax  Court,  3  Howard  133  (1844). 

"(111.)  State  Railroad  Tax  Cases,  2  Otto  603  (1876),  citing  Society 
for  Savings  vs.  Coite,  6  Wall  607  (1867). 


8  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [8 

In  the  words  of  the  Supreme  Court  of  Illinois,  capital 
stock  is  construed  to  mean  "all  the  property  and  rights  of 
the  corporation,  of  any  kind  or  nature,  wherever  located."14 
This,  as  will  be  seen  later,  is  a  construction  of  a  phrase, 
"capital  stock  including  the  franchise,"  occurring  in  the 
revenue  law.  For  a  definition  of  taxation  on  "franchise," 
as  enumerated  thirdly  in  the  opinion  above,  Professor  Sel- 
igman  again  is  of  assistance.  In  his  article  in  the  Rcvieic 
of  Reviews  for  June,  1904,  on  "The  Special  Franchise  Tax 
in  New  York,"  he  defines  a  franchise  tax  on  a  corporation 
to  be  a  tax:  1.  on  the  right  to  be  or  become;  2.  on  the 
right  to  do  or  act;  3.  on  the  right  to  make  use  of 
local  privileges.  An  example  of  the  first  is  a  fee  for  incor- 
poration ;  of  the  second,  a  license  tax  on  business  done ;  of 
the  third,  license  tax  for  use  of  streets  for  tracks  or  gas 
mains.15 

By  wray  of  summary,  corporation  taxes  in  Illinois  may 
now  be  re-defined  to  be  those  taxes  which  the  corporation, 
as  a  person,  through  its  officers,  pays  on  its  realty  and  per- 
sonalty, its  capital  stock,  and  its  franchise  values.  Or, 
viewed  from  another  angle,  the  taxation  of  corporations  in 
Illinois  means  the  attempt  of  the  State  to  tax  each16  corpor- 
ation upon  its  actual  value17  as  a  going  concern.18  This, 
as  already  stated,  is  not  accomplished,  however,  by  a  sep- 
arate system  of  corporation  taxes.  The  following  brief 
analysis  explains  how  it  is  attempted. 

Since  1872  corporations  have  been  taxed  under  two 
main  heads:  1.  Under  the  modified  general  property  tax 
system ;  2.  under  the  police  power  of  the  State.  The  con- 
stitutional basis  for  the  system  lies  in  sections  one  and  two 

"O.  &  M.  R.  R.  Co.  vs.  Weber,  96  111.  445  (1880). 

^Review  of  Reviews,  XXIX,  716-718. 

"Certain  classes  of  corporations  are  excepted;  see  chap.  IV. 

17One-third,  rather,  as  in  case  of  all  other  persons,  since  1909.  Prior 
to  that  on  same  scale  as  other  property,  ranging  from  60%  in  '73  to  59% 
in  the  '8o's  to  25  and  20%  in  the  'go's. 

18Seager,  "Introduction  to  Economics"  p.  555  ff.,  "corporation  taxes." 
Also  Pacific  Hotel  Co.  vs.  Lieb,  83  111.  602  (1867). 


9]  INTRODUCTION  9 

of   Article    IX,    the    article    on    Revenue.     They   are    as 
follows  :19 

Sec.  i.  The  general  assembly  shall  provide  such  revenue  as  may  be 
needful  by  levying  a  tax,  by  valuation,  so  that  every  person  and  corporation 
shall  pay  a  tax  in  proportion  to  the  value  of  his,  her  or  its  property — such 
value  to  be  ascertained  by  some  person  or  persons,  to  be  elected  or  ap- 
pointed in  such  manner  as  the  general  assembly  shall  direct,  and  not  other- 
wise ;  but  the  general  assembly  shall  have  power  to  tax  peddlers, 
auctioneers,  brokers,  hawkers,  merchants,  commission  merchants,  showmen, 
jugglers,  innkeepers,  grocery  keepers,  liquor  dealers,  toll  bridges,  ferries, 
insurance,  telegraph  and  express  interests  or  business,  venders  of  patents, 
and  persons  or  corporations  owning  or  using  franchises  and  privileges, 
in  such  manner  as  it  shall  from  time  to  time  direct  by  general  law,  uniform 
as  to  the  class  upon  which  it  operates. 

Sec.  2.  The  specification  of  the  objects  and  subjects  of  taxation  shall 
not  deprive  the  general  assembly  of  the  power  to  require  other  subjects 
or  objects  to  be  taxed  in  such  manner  as  may  be  consistent  with  the 
principles  of  taxation  fixed  in  this  constitution. 

Sections  nine  and  ten  of  the  Revenue  article  contain 
limitations  upon  that  power.  They  are  as  follows : 

Section  9.  The  general  assembly  may  vest  the  corporate  authorities  of 
cities,  towns  and  villages  with  power  to  make  local  improvements  by 
special  assessment,  or  by  special  taxation  of  contiguous  property,  or  other- 
wise. For  all  other  corporate  purposes,  all  municipal  corporations  may  be 
vested  with  authority  to  assess  and  collect  taxes;  but  such  taxes  shall  be 
uniform  in  respect  to  persons  and  property,  within  the  jurisdiction  of  the 
body  imposing  the  same. 

Sec.  10.  The  general  assembly  shall  not  impose  taxes  upon  municipal 
corporations,  or  the  inhabitants  or  property  thereof,  for  corporate  pur- 
poses, but  shall  require  that  'all  the  taxable  property  within  the  limits  of 
municipal  corporations  shall  be  taxed  for  the  payment  of  debts  contracted 
under  authority  of  law,  such  taxes  to  be  uniform  in  respect  to  persons 
and  property,  within  the  jurisdiction  of  the  body  imposing  the  same. 
Private  property  shall  not  be  liable  to  be  taken  or  sold  for  the  payment  of 
the  corporate  debts  of  a  municipal  corporation. 

Obviously  section  one  of  the  revenue  article  of  the 
constitution,  as  seen  above,  in  italics,  affords  basis  for 
acts  of  the  legislature  providing  for  the  taxation  of  corpo- 
rations under  the  two  main  heads  outlined  above  at  the 
beginning,  namely,  the  general  property  tax,  and  police 
power,  or  regulative  tax.  Further,  section  one,  clause  two, 

"Constitution  of  Illinois,  1870.    Article  IX.    Italics  not  in  original. 


10  TAXATION  OF  CORPORATIONS  IX  ILLINOIS  [10 

and  section  two,  afford  basis  for  the  power  of  the  legisla- 
ture to  modify  the  general  property  tax  method  so  as  to 
subject  corporations,  or  rather  certain  classes  of  corpora- 
tions, to  a  special  scheme  of  assessment. 

It  is  also  obvious  that  the  only  limitations  "fixed  in 
this  constitution"  in  regard  to  the  power  of  the  general 
assembly  to  devise  improved  methods  of  taxing  corpora- 
tions, consist — as  suggested  by  the  italicizing  above — in 
the  two  fundamental  principles  of  "uniformity  and  equality 
in  the  distribution  of  the  burdens  of  taxation,"20  and  also 
in  the  mandates  of  sections  one  and  ten,  that  all  taxing 
must  be  "by  general  law",  and  that  the  legislature  must 
require  cities  to  levy  a  general  property  tax  upon  corpo- 
rations as  on  other  persons. 

The  general  assembly — the  courts  sustaining  by  legal 
decisions21 — has  interpreted  its  power  to  be  plenary  enough 
"to  tax  occupations,  franchises,  privileges,  and  business 
and  property  interests  of  different  kinds  in  a  different 
manner  from  the  manner  prescribed  for  the  taxation  of 
property  generally."22  And  in  1872,  the  first  general  as- 
sembly, under  the  present  constitution,  framed  a  new  reve- 
nue law  which  provided  that  under  the  modified  general 
property  tax  system,  corporations,  other  than  railroads,23 
are  taxed  in  two  ways :  1.  in  general,  on  real  estate  and  per- 
sonal property,  assessment  being  made  by  local  assessors; 
2.  on  "corporate  excess",  assessment  being  made  by  the 
State  Board  of  Equalization.  The  first  aims  to  assess  the 
tangible  property,  the  second  to  assess  the  intangible, 
"invisible",  property  of  the  corporation.  The  assessment  of 


20Justice  Carter,  Raymond  vs.  Hartford  Fire  Ins.  Co.,  196  111.  337 
(1902). 

"Treated  in  Chapter  III. 

22Justice  Carter's  words ;  Raymond  vs.  Hartford  Fire  Ins.  Co.,  196 
111.  337  (1902)  ;  Porter  vs.  R.  R.  I.  &  St.  L.  R.  R.  Co.,  76  111.  561  (1875). 

23While  this  study  excludes  railroad  corporations,  it  may  be  stated 
here  that  most  of  their  tangible  property  as  well  as  their  "corporate 
excess"  is  assessed  by  the  Board  of  Equalization.  But  the  scheme  of  dis- 
tribution of  assessment  is  different. 


11]  INTRODUCTION  11 

the  "excess"  is  returned  ultimately  to  the  local  tax  collec- 
tor24 and  combined  with  the  local  assessment  on  tangible 
property,  the  sum  of  the  two  being  taken  as  the  asssessed 
valuation  upon  which  the  corporation  pays  the  general 
property  tax,  local  and  state. 

A  brief  statement  will  suffice  in  regard  to  the  local 
assessment  of  real  estate  and  personal  property.  It  is  the 
same  for  corporations  as  for  natural  persons.  The  local 
assessor  views  and  assesses  the  realty.25  An  officer  of  the 
corporation  must  list  the  personal  property  in  May  or  June 
with  the  local  assessor  who  may,  if  he  thinks  the  list  not 
"full,  fair  and  complete",  examine  the  corporation  under 
oath  as  to  the  amount  of  the  personal  property.20  ( Law  of 
1898  provides  that  oath  must  be  taken  in  every  case.)  If 
the  corporation  refuses  to  list  or  submits  a  fraudulent  list, 
it  is  subject  to  a  fine  of  from  $10  to  $2000,  and  to  punish- 
ment for  perjury.27  When  the  corporation  refuses  to  sub- 
mit a  list  of  its  personal  property,  it  is  the  duty  of  the 
assessor  to  return  one  "according  to  his  best  judgment  and 
information."28  From  these  lists  the  assessor  determines 
the  valuation  on  personalty.  This  valuation  combined 
with  the  valuation  on  real  property  gives  the  tangible 
property  valuation  of  the  corporation. 

The  assessment  of  the  intangible  property  of  corpora- 
tions, by  the  State  Board  of  Equalization,  under  what  is 
known  as  the  "corporate  excess"  method,  may  also  be  dis- 
cussed briefly  here  because  its  administration  by  the  Board 
from  1872  to  the  present,  will,  in  another  chapter,  be  treat- 
ed at  length.  The  Board  receives  returns  from  each  cor- 
poration29 giving  statements:  1.  of  its  capital  stock  and 
its  market  or  actual  value  on  April  1 ;  2.  of  its  funded  debt ; 

24Except  in  cases  of  telegraph  companies,  whose  tax  on  "excess"  is 
collected  by  county  collector.    Revenue  law,  Kurd,  1872,  sec.  54. 
25Revenue  law,  Kurd,  sections  4,  76. 
28Revenue  law,  Hurd,  sections  4,  6,  24,  26. 
-''Idem,  sections  56,  57. 
28Idem,  sections  26,  83. 
29Certain  classes  excepted ;  treated  in  Chapter  IV. 


12  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [12 

3.  of  its  assessed  valuation  on  tangible  property.30  The 
Board  also  may  have  or  may  obtain  information  from  other 
sources31  in  regard  to  the  value  of  the  capital  stock  includ- 
ing the  franchise,  and  of  the  funded  debt.  It  determines 
the  value  of  these  and  takes  one-third  of  the  amount  (be- 
fore 1909  one-fifth)32  to  be  the  assessed  value  of  the  cor- 
poration's total  property  both  tangible  and  intangible. 
Meanwhile  the  Board  in  its  other  duty  of  equalizing  real 
and  personal  property  assessments  among  counties  may 
have  found  that  the  realty  and  personal  property  of  the 
county  where  the  corporation  is  located,  is  assessed  above 
or  below  the  average  of  state  valuation,  in  which  case  the 
Board  equalizes  such  county  valuation  by  directing  all 
property  to  be  raised  or  lowered  some  certain  percentage. 
Now,  the  Board,  itself,  uses  this  determined  percentage  to 
compute  the  equalized  value  of  the  realty  and  personal  pro- 
perty of  the  corporation  assessed  by  the  local  asessor  and 
reported  by  the  corporation  to  the  Board.33  The  Board 
then  deducts  the  amount  of  this  equalized  value  of  tangible 
property  assessed  locally,  from  the  amount  which,  as 
already  explained,  it  has  determined  to  be  the  total  value 
of  the  corporation's  taxable  property,  both  tangible  and 
intangible.34  The  remainder,  if  any,  is  taken  to  be  the 
assessment  of  the  intangible  value,  the  "corporate  excess" 
which  the  Board  is  required  to  certify  through  the  Auditor 
to  the  county  clerk,  to  be  entered  on  the  tax  roll35  against 
the  name  of  the  corporation.  Thus  the  intangible  and 
tangible  property  of  the  corporation  are  reached,  the  one 
mainly  through  the  Board  of  Equalization,  the  other 
through  the  local  assessor.36 

30Revenue  law,  Kurd,  section  32. 

31Quincy  Bridge  Co.  vs.  Adams  County,  88  111.  615  (1878). 

32Laws  of  111.,  1898,  amending  revenue  law,  p.  43. 

^Proceedings  State  Board  of  Equalization,  1873,  P-  16  (Rules)  ;  also 
State  Board  of  Equalization  vs.  People,  191  111.  528  (1901). 

"Idem. 

"Revenue  law,  Kurd,  section  108. 

8aBut  the  law  exempts  the  shares  of  stock  in  the  hands  of  stockholders 
from  local  assessment,  if  Board  assesses  capital  stock. 


13]  INTRODUCTION  13 

Besides  taxing  corporations  under  the  modified  gen- 
eral property  tax  system,  Illinois  also  taxes  them  under  the 
police,  or  regulative  power.  Domestic  corporations  are 
required  to  pay  fees  for  incorporation,  for  increase  of 
capital  stock,  and  for  filing  periodical  reports.37  This  is 
a  growing  source  of  State  revenue,  and  is  a  subject  itself 
large  enough  for  separate  study;38  hence  it  is  passed  over 
briefly  in  this  study.  Foreign  corporations  are  required  to 
pay  fees  for  filing  reports,  for  licenses  to  their  agents,  and 
"reciprocal"  taxes,  fines,  fees  and  so  forth.  Finally,  all  cor- 
porations are  subject  to  municipal  license  and  franchise 
taxes. 

The  foregoing  analysis  from  the  viewpoint  of  govern- 
mental purpose  and  method,  may  now  be  supplemented  by 
one  from  another  viewpoint,  namely,  the  consideration  of 
the  character  of  the  corporation.  For  this  purpose,  all 
corporations  existing  in  Illinois  may  be  classified  as  fol- 
lows: 

A.  Public  Corporations. 

I.  County  and  township. 

II.  City  and  village. 

III.  Public  institutions  and  bodies. 

a.  Educational. 

b.  Eleemosynary. 

c.  Administrative  boards. 

B.  Private  Corporations. 

I.  Not  for  pecuniary  profit. 

a.  Religious,  educational,  library,  charitable,   cemetery,  agri- 
cultural, horticultural,  mechanical,  philosophical. 

b.  All  others. 

II.  For  pecuniary  profit. 

a.  Business,  or  commercial. 

1.  National  Banks. 

2.  Banks  under  general  banking  law. 

3.  Building  and  loan  associations. 

4.  Corporations  organized  for  purely  manufacturing  and 
mercantile  purposes,   for  printing,  publishing,  mining 
and  sale  of  coal,  stock-breeding. 

37To  be  dealt  with  later. 

3SSee  "Special  Taxes",   Master's  thesis,  University  of  Illinois,   1909, 
by  T.  E.  Latimer. 


14  TAXATION  OF  CORWHATIOXS  IX  ILLINOIS  [14 

5.  Private    banks    organized    under    special    laws,    loan 
companies,  domestic  insurance  companies,  bridge  com- 
panies, dredging  companies,  hotel  companies,  storage 
companies,  laundry  companies,  amusement  companies, 
hardware  companies,  dry  goods  companies,  provision 
companies,  restaurant  companies,  dairy  companies,  and 
many  others.     (Names  of  over  2500  private  business 
corporations  to  be  seen  in  tables  of  the   Proceedings 
of  Board  of  Equalization,   1907). 

6.  Foreign  private  business  corporations  for  profit,  in- 
surance companies  noted  especially. 

b.  Public  Service  Corporations. 

1.  Telegraph,  telephone. 

2.  Express,    freight,    elevator.39 

3.  Street  railroad,  ferry,  road,  tunnel. 

4.  Gas,  coke,  electric,  water. 

5.  Crematory,  garbage. 

In  regard  to  class  A  little  is  to  be  said  except  that  the 
constitution  permits  and  the  revenue  law  provides  that  the 
property  of  all  such  corporations  shall  be  exempt  from 
taxation.40  In  fact  the  constitution  prohibits  the  general 
assembly  from  taxing  municipalities.41 

Those  corporations  in  class  B,  I,  a.  must  pay  an  in- 
corporation fee  of  $10 ;  but  if  they  use  their  property  purely 
for  social  purposes,  as  indicated  in  their  charters  or  consti- 
tutions, and  not  for  pecuniary  profit,  the  constitution  per- 
mits42 and  the  revenue  law  provides43  that  they  shall  be 
exempt  from  taxation  on  the  property.  However,  the  law 
is  construed  very  strictly ;  and  if  a  society,  association  or 
organization  own  buildings  or  other  property  which  is  used 
for  some  foreign  purpose,  wholly  or,  in  part,  and  thereby 
returns  the  society  a  pecuniary  profit,  it  must  pay  taxes  on 
such  property  the  same  as  though  it  had  organized  as  a 
business  corporation  for  pecuniary  profit.  More  will  be 

39Those  that  own  public  warehouses. 

40But  city  property  owned  and  used  in  a  foreign  taxing  district  for 
profit  to  the  city  is  taxable  by  that  foreign  district. 
"Constitution  of  1870,  article  IX,  section  10. 
"Art.  IX,  sec.  3. 
"Revenue  law,  Hurd,  sec.  2. 


15]  INTRODUCTION  15 

said  about  this  in  a  chapter  devoted  to  corporations  ex- 
empt from  "corporate  excess"  methods. 

The  corporations  in  class  B,  I,  b.  pay  the  $10  incorpo- 
ration fee,  the  annual  fee  for  filing  reports,  and  taxes  upon 
their  real  estate  and  personalty.  This  class  includes  clubs 
and  other  social  organizations,  which  have  become  incor- 
porated. An  incorporated  labor  organization  also  comes  in 
this  class,  and  its  strike  fund  is  taxable. 

Corporations  of  classes  B,  II,  a.,  1,  2,  3,  4,  with  excep- 
tion of  national  banks,  pay  incorporation  fees  which  vary 
with  the  amount  of  the  capital  stock,  and  fees  for  increase 
of  capital  stock;  also  fees  for  filing  annual  report;  and 
banks  pay  fees  for  their  quarterly  reports  and  expense  of 
state  inspection.44  They  all  pay  taxes  on  their  real  and 
personal  property  as  assessed  by  the  assessor ;  but  for  vari- 
ous reasons,  they  are  not  taxed  on  a  "corporate  excess", 
or  intangible  property  valuation,  assessed  by  the  Board  of 
Equalization.  National  banks  are  by  the  laws  of  the 
United  States  exempt  from  that  tax.45  The  others  are  ex- 
empted by  the  revenue  law  of  the  state.46  Full  explanation 
of  these  exemptions  from  the  "corporate  excess"  is  given 
in  Chapter  IV. 

Corporations  in  classes-B,  II,  a,  5,  and  b.  1,  2,  3,  4,  5  are 
those  which  are  taxed  on  their  "corporate  excess",  as  well 
as  on  real  and  personal  property,  and  by  fees  for  incorpor- 
ation and  increase  of  capital  stock.  This  class  comprises  a 
small  number  of  corporations ;  in  1907  the  Board  of  Equal- 
ization determined  the  taxable  valuation  of  2,536  of  them, 
of  which  only  1,302  companies  were  found  to  have  an  "ex- 
cess"47 value  "over  and  above  the  assessed  value  of  the 


"Further  details  in  Chapter  IV. 

45Act  of  Congress  1864.     See  Baker  vs.  First  National  Bank,  67  111. 

297  (1873)- 

46State  banks  exempted  in  1867.  Laws  of  111.  1867,  special  session,  p.  6. 
But  banks  organized  under  special  charter  instead  of  under  the  general 
banking  laws,  were  subject  to  the  "corporate  excess"  assessment  by  the 
Board  from  1873  to  1893. 

47Denominated  "excess"  in  tabulated  reports  of  Board. 


16  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [16 

tangible  property."48  This  assessment  of  the  "corporate 
excess"  is  the  most  notable  feature  of  the  taxation  of  cor- 
porations in  Illinois;  and  since  the  Board  of  Equalization 
from  1872  to  the  present,  has  had  the  administration  of 
that  duty,  further  exposition  of  this  method  will  be  given 
in  the  chapter  on  the  "corporate  execess"  method  of  assess- 
ment. 

It  must  be  noted  further  in  regard  to  public  service 
corporations  that  in  municipalities  they  are  taxed  also  on 
their  franchise  rights  "to  make  use  of  local  privileges."49 

Corporations  in  class  II,  B,  a.,  6,  that  is  foreign  cor- 
porations for  profit,  are,  in  general,  taxable  only  on  real 
and  personal  property.  They  cannot  be  taxed  on  capital 
stock  and  franchise  right  "to  be",  that  is  by  the  "corporate 
excess"  method.  But,  under  the  police  power  of  the  State, 
they  are  subject  to  license  taxes  for  the  franchise  right  "to 
do  or  act"  or  "to  use  local  privileges."  Insurance  com- 
panies are  to  be  especially  noted  with  respect  to  "recipro- 
cal" taxes;  but  since  the  exposition  is  detailed,  it  has  been 
placed  in  chapter  five. 

If  this  first  chapter  has  given  a  general  idea  of  the 
problem  of  taxing  corporations,  of  the  nature  of  corpora- 
tion taxes,  and  of  the  method  used  in  Illinois  in  taxing 
corporations,  it  has  accomplished  its  purpose.  The  expo- 
sition of  the  details  of  the  subject  and  of  the  historical 
development  of  corporation  taxation  since  1872,  will  be 
taken  up  in  the  following  chapters. 


48Language  of  revenue  law,  Kurd,  sec.  3,  clause  4. 
49Seligman's  definition,  quoted  above. 


CHAPTER  II. 

THE  STATE  BOARD  OF  EQUALIZATION  RELATIVE  TO  "COR- 
PORATE EXCESS"  METHOD  OF  ASSESSMENT. 

The  State  Board  of  Equalization  was  authorized  by 
the  legislature  in  186T.1  The  first  Board,  which  met  at 
Springfield,  October  1,  1867,  was  composed  of  twenty-six 
members:  the  Auditor  of  Public  Accounts,  and  one  mem- 
ber elected  from  each  of  the  twenty-five  Senatorial  dis- 
tricts. The  duty  of  the  Board  was  to  equalize  the  aggre- 
gate assessed  valuation  of  property  reported  to  the  Auditor 
by  the  county  clerks,  that  is  to  place  all  the  counties  of  the 
State  on  the  same  percentage  level  of  valuation.  This  the 
Board  did  by  directing  certain  percentage  increases  of  val- 
uation to  those  counties  which  they  found  to  be  assessed 
below  the  general  average  percentage  of  cash  valuation, 
and  certain  percentage  decreases  to  those  counties  which 
they  found  to  be  assessed  above  the  average. 

But  the  Board  of  Equalization  in  the  period  from  1867 
to  1872  had  no  power  beyond  that  of  equalizing  county 
valuations.  It  had  not  the  power  to  assess  corporations  as 
it  has  had  since  1872.  Neither  was  there  any  separate 
equalization  of  corporation  property;  the  assessed  valua- 
tion of  such  property  in  any  given  county  was  raised  or 
lowered  or  left  intact,  as  the  case  might  be,  after  the  equal- 
izing direction  of  the  Board,  in  the  same  manner  and  to 
the  same  extent  as  was  other  property  in  the  same  given 
county. 

However,  the  influence  of  the  Board  on  corporation 
taxation  is  worth  noticing.  In  ascertaining  the  rightful 
valuation  of  property  in  the  various  counties,  pursuant  to 
their  duty  of  equalizing,  the  Board  early  discovered  at  its 
first  session  the  problem  of  properly  assessing  corpora- 

JLa\vs  of  1867,  p.  105. 

17 


18  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [18 

tions.2  The  Committee  on  Personal  Property  reported  a 
resolution  recommending  to  local  assessors  that  all  bank, 
insurance,  railroad  and  other  stocks  be  returned  at  par 
value.3  The  next  year  the  Board  passed  resolutions  recom- 
mending revision  and  amendment  of  the  law,4  and  in  1869 
the  Board  authorized  Chairman  Lippincott  and  Secretary 
Stadden  to  prepare  a  revenue  bill  to  present  to  the  Board 
at  its  session  in  1870.5  It  was  prepared  as  ordered  and, 
from  October  7, 1870,  to  October  24,  the  Board  had  the  pro- 
posed revenue  bill  under  consideration.6  On  the  26th  it 
was  proposed  to  authorize  a  committee  to  urge  its  passage 
at  the  next  legislature,  but  on  the  next  day  it  was  decided 
to  leave  the  duty  to  Chairman  Lippincott  and  Secretary 
Stadden. 

Governor  Palmer,  in  his  message  of  January  4,  1871, 
to  the  General  Assembly,  recommended  this  bill  "as  the 
work  of  practical  men  of  extensive  experience."7  At  the 
regular  session  in  1871  the  legislature  failed  to  provide  a 
new  revenue  law,  but  at  its  special  session  in  1872,  on 
March  30,  enacted  the  general  revenue  law  under  which  the 
State  Board  of  Equalization  has  had  a  large  part  of  the 
work  of  assessing  the  property  of  Illinois  corporations. 

In  1872  at  a  meeting  of  the  Board  of  Equalization, 
Chairman  Lippincott  said : 

I  can  not  forget  that  the  State  of  Illinois  owes  to  this  Board  the 
inception  of  an  improved  revenue  system,  which  in  my  opinion  will  prove 
of  inestimable  service  to  the  state.... The  care,  the  intelligence,  the  con- 
scientious effort  displayed  by  this  Board  in  the  original  draft  of  the  revenue 
law,  calls  for  my  high  admiration.8 

From  the  foregoing  facts  drawn  from  records  of  the 
Board's  proceedings  relative  to  its  action  in  regard  to  the 
new  revenue  law,  from  the  statement  of  Governor  Palmer, 

^Proceedings  State  Board  of  Equalisation,  pp.  37-38,  58-59- 

sldetn,  p.  60. 

*Idem,  1868,  p.  81. 

side  in,  1869,  pp.  37-39,  58-59- 

*ldem,  1870,  Oct.  7  to  Oct.  27. 

*  Journal  of  Senate,  1871,  vol.  i,  p.  27,  Governor's  Message. 

^Proceedings  State  Board  of  Equalisation,  1872,  p.  61. 


19]  ASSESSMENT   OF   CORPORATE   EXCESS  19 

and  from  the  remark  of  Mr.  Lippincott,  it  may  be  safely 
inferred  that  the  Board  of  Equalization  in  its  early  period 
from  1867  to  1872  had  a  large  influence  upon  the  prepara- 
tion of  the  present  system  of  taxing  corporations. 

Three  other  facts  might  be  noted  in  this  connection. 
First,  the  New  York  Tax  Commission  of  1870  recommend- 
ed the  "corporate  excess"  method  of  assessing  corpora- 
tions.9 Second,  Chairman  Lippincott  of  the  Board  of 
Equalization,  who  was  chief  author  of  the  revenue  bill  of 
1871-1872,  was  in  New  York  in  the  summer  of  1870.10 
Third,  in  a  letter  to  Governor  Palmer  five  days  before  the 
pasage  of  the  revenue  law  of  1872,  Mr.  Lippincott,  urging 
the  necessity  of  passing  the  new  law,  showed  that  under 
the  laws  then  in  force  much  intangible  property  was  escap- 
ing taxation.11  y 

Since  the  revenue  law  of  1872  the  Board  of  Equaliza- 
tion has  had  a  prominent  part  in  the  taxation  of  corpora- 
tions. The  powers  and  duties  of  the  Board  were  enlarged 
by  adding  to  its  equalizing  duty  that  of  assessing  the  in- 
tangible property  of  corporations.  The  capital  stock  of 
companies  and  associations  organized  under  the  laws  of 
Illinois12  is  so  valued  by  the  Board  as  "to  ascertain  and 
determine  respectively  the  fair  cash  value  of  the  capital 
stock  including  the  franchise  over  and  above  the  assessed 
valuation  of  the  tangible  property.!'  The  excess  in  the 
value  of  the  capital  stock,  including  the  franchise,  over  and 
above  that  of  their  tangible  property,  is  known  as  the  "cor- 
porate excess." 

To  assist  the  Board  in  this  work,  the  law  provides  that 
all  corporations  that  are  subject  to  assessment  by  the 
Board  shall  in  addition  to  the  lists  of  personal  property, 
"make  out  and  deliver  to  the  assessor  a  sworn  statement  of 

9Jas.  K.  Edsall,  brief  to  United  States  Supreme  Court,  State  Railroad 
Tax  Cases,  II  Otto  592  (1875). 

10Report  to  General  Assembly,  1871,  vol.  4,  page  85. 

llldem,  page  101. 

12Not  all ;  certain  classes  of  corporations  have  been  exempted  from 
time  to  time ;  see  chapter  IV. 


20  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [20 

the  amount  of  its  capital  stock,  setting  forth  particularly : 

First.  The  name  and  location  of  the  company  cr 
association. 

Second.  The  amount  of  capital  stock  authorized,  and 
the  number  of  shares  into  which  such  capital  stock  is 
divided. 

Third.     The  amount  of  capital  stock  paid  up. 

Fourth.  The  market  value,  or  if  no  market  value,  then 
the  actual  value  of  the  shares  of  stock. 

Fifth.  The  total  amount  of  indebtedness,  except  the 
indebtedness  for  current  expenses,  excluding  from  such 
expenses  the  amount  paid  for  the  purchase  or  improvement 
of  property. 

Sixth.  The  assessed  valuation  of  all  its  tangible  pro- 
perty, such  schedule  to  be  made  in  conformity  to  such  in- 
structions and  forms  as  may  be  prescribed  by  the  Auditor 
of  Public  Accounts."13 

These  statements  are  returned  by  the  assessor  to  the 
county  clerk,  by  him  forwarded  to  the  Auditor,  and  by  him 
are  turned  over  to  the  Board  of  Equalization.  In  case  of 
Illinois  telegraph  companies,  the  data  are  collected  in  a 
slightly  different  way.  Each  company  returns  its  state- 
ment directly  to  the  Auditor,  annually,  in  the  month  of 
May.14  The  statements  of  the  telegraph  companies  must, 
in  addition  to  the  information  required  of  other  corpora- 
tions, contain  information  as  to  the  length  of  lines  operat- 
ed in  each  county  and  the  total  in  the  state.15 

There  is,  however,  no  means  of  enforcing  the  forego- 
ing provisions.  The  law  provides,  that  in  all  cases  of  fail- 
ure or  refusal  of  a  corporation  to  make  a  sworn  statement 
on  the  proper  blank,  and  return  it  to  the  assessor,  that  the 
assessor  shall  make  the  return  from  the  best  information 

18Revenue  Law  1872,  section  32. 

J4Revenue  Law   1872,  section  53. 

15A  foreign  corporation  that  operates  an  Illinois  corporation's  line 
under  lease,  must  make  return  for  the  Illinois  line.  Postal  Tel.  Cable 
Co.  vs.  Barnard,  37  111.  App.  105  (1890). 


21]  ASSESSMENT   OF  CORPORATE  EXCESS  21 

which  he  can  obtain.16  To  get  additional  information  and 
to  supply  deficiencies  in  regular  returns,  data  may  be 
secured  by  independent  investigation  of  the  Board.17 

The  rules  by  which  the  Board  of  Equalization  assess 
the  "corporate  excess"  are,  according  to  the  provisions  of 
the  law,  left  to  the  discretion  of  the  Board,  itself.  The 
Supreme  Court  of  Illinois  in  1874  denied  that  the  granting 
of  power  to  the  Board  to  adopt  its  own  rules  of  assessment, 
was  a  delegation  of  legislative  power,  and  sustained  the 
validity  of  the  provision  in  the  revenue  law,  granting  such 
power  to  the  Board  of  Equalization.18  The  discussion  of 
the  making  of  their  rules,  and  also,  of  the  constitutional 
and  statutory19  limitations  upon  the  character  of  the  rules 
for  assessing  the  "corporate  execess",  will  be  treated  below 
in  the  history  of  the  Board's  administration. 

After  the  Board  of  Equalization  has  assessed  the 
amount  of  "corporate  excess"  to  each  corporation  that  is 
subject  to  its  jurisdiction,  its  further  duty  consists  in  cer- 
tifying the  "excess"  to  the  clerks  of  the  counties  in  which 
the  corporations  are  located,  so  that  the  "corporate  ex- 
cess" may  be  spread  upon  the  tax  roll  along  with  the  other 
property  of  the  corporation.20 

A  brief  history  of  the  Board's  administration  might 
easily  occupy  an  extensive  volume.  In  this  study  is  includ- 
ed such  portion  only  of  its  history  as  is  needful  for  the 
exposition  of  its  powers  and  jurisdiction,  its  difficulties  in 
getting  data,  its  rules  for  valuing  the  corporation  as  a 


"Revenue  Law  1872,  section  32. 

"Sup.  Ct.,  St.  L.  V.  &  T.  H.  R.  R.  Co.  vs.  Surrell,  88  111.  535  (1878). 

"Porter  vs.  Rockford,  Rock  Island  &  St.  Louis  Railroad  Co.,  76  111. 
563.  (1875,  Jan.  term). 

19Laws  of  Illinois,  special  session,  1898. 

20The  Supreme  Court  has  construed  the  tax  on  the  "corporate  ex- 
cess" to  be  a  personal  property  tax.  Quincy  Bridge  Co.  vs.  Adams  County, 
88  111.  615  (1878)  ;  Peter  Saup  et  al  vs.  Morgan  &  Co.,  108  111.  326  (1884)  ; 
Parsons  et  al  vs.  Gas  Light  &  Coke  Co.,  108  111.  380  (1884)  ;  The  Hub  vs. 
Hanberg,  211  111.  43  (19x14). 


22  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [22 

going  concern,  and  its  efficiency21  as  an  assessor  of  in- 
tangible property. 

The  Board  had  but  little  difficulty  interpreting  its  new 
powers  and  duties.  The  law  is  plain  in  regard  to  the 
duties;  but  it  leaves  the  Board  wide  discretionary  powers 
as  to  the  rules  it  shall  use.  It  may  be  noted  that  the  Chair- 
man of  the  Board  from  1873  to  1876  inclusive,  was  Auditor 
C.  E.  Lippincott,  who  had  been  on  the  Board  from  1868  to 
1873  and  had  had  much  to  do  with  the  framing  of  the  new 
revenue  law.  One  error  was  made  at  the  first  session.  The 
Western  Union  Telegraph  Company,  a  foreign  corporation 
owning  lines  in  the  state,  was  assessed  at  the  same  time 
Illinois  telegraph  companies  were  assessed.  And  the  Su- 
preme Court,  in  January,  1874,  held  that  the  Board  had 
exceeded  its  jurisdiction  in  trying  to  bring  foreign  corpo- 
rations under  the  operation  of  the  "corporate  excess" 
method  of  taxing  capital  stock  and  franchise.22  The  Court 
decided  the  question  on  the  wording  and  intent  of  the 
statute,  not  on  the  economic  merits  of  the  question.  Econ- 
omic opinion  was  not  called  for. 

In  1890  the  Appellate  Court  decided  that  it  is  the  duty 
of  a  foreign  telegraph  company  operating  under  lease  the 
line  of  a  domestic  corporation,  to  return  to  the  Auditor  the 
schedule  or  statement  required  by  law.23 

In  1880  the  Supreme  Court  held  that  where  a  corpora- 
tion is  formed  under  the  laws  of  Illinois,  by  consolidation 
of  other  corporations,  one  of  which  is  incorporated  under 
the  laws  of  this  and  the  others  of  other  states,  the  new 
company  is  to  be  considered  as  incoporated  under  the  laws 
of  this  state  within  the  meaning  of  the  revenue  law  of  1872. 
And  the  capital  stock  located  or  used  in  this  state,  of  such 
corporation,  is  subject  to  be  assessed  and  taxed  as  such.24 


21Facts   brought   out   in    this    chapter ;    deductions    from   these    facts 
brought  out  in  Chapters  III  and  IV,  are  reserved  for  concluding  chapter. 
22 Western  Union  Telegraph  Co.  vs.  Lieb,  76  111.  172  (1874). 
23Postal  Telegraph  Cable  Co.  vs.  Barnard,  37  111.  App.  105  (1890). 
"Ohio  and  Mississippi  R.  R.  Co.  vs.  Weber,  96  111.  443  (1880). 


23]  ASSESSMENT  OF  CORPORATE   EXCESS  23 

In  1896  a  similar  decision  was  Landed  down  in  the  case  of 
a  bridge  company  which  was  a  consolidation  of  Illinois 
and  Iowa  corporations.  The  Supreme  Court  held  that  "all 
the  capital  stock  of  a  corporation  formed  by  consolidation 
of  corporations  of  different  states  is  properly  taxable  in 
one  of  the  states,  as  the  corporate  existence  springs  from 
the  legislature  of  the  state  and  is  to  be  regarded  and  treat- 
ed by  the  authorities  of  the  state  as  domiciled  there."25 
Here  again  the  decisions  hinge  not  on  economic  but  on 
legal  considerations. 

Reference  is  to  be  made  now  to  a  jurisdictional  ques- 
tion that  was  brought  up  under  economic  considerations. 
In  1895  at  the  first  day's  session  of  the  Board  of  Equaliza- 
tion for  that  year,  Mr.  Cullerton,  a  member  from  Cook 
County,  introduced  resolutions  which  averred  that  large 
amounts  of  capital  stock  were  escaping  taxation  because 
the  companies  had  a  majority  of  their  stock  "merged"  in 
foreign  corporations;  and  which  requested  the  Attorney 
General  to  render  his  opinion  as  to  the  Board's  right  to 
assess  the  capital  stock  or  such  a  portion  thereof  as  may 
be  made  up  of  the  capital  stock  of  any  corporation  which 
was  organized  under,  and  was  doing  business  under,  the 
laws  of  Illinois  at  the  time  of  the  consolidation  and  re- 
organization under  the  laws  of  another  state.26  But  the 
resolutions  were  postponed  and  later  were  tabled  by  a  vote 
of  ten  to  eight.27  The  question  does  not  appear  again  in  the 
records  of  the  Board.  It  is  a  question  that  the  jurist  might, 
if  a  case  ever  arose,  quite  likely  decide  in  the  negative,  but 
which  the  economist  might  decide  in  the  affirmative.  The 
jurist  has  to  decide,  consistently  with  his  previous  rulings, 
that  the  franchise  value  follows  the  legal  person  to  its 
domicile  in  the  state  which  gave  to  it  the  legal  character  of 
a  person;  but  the  economist  has  to  consider  the  question 
of  where  the  franchise  value  does  actually  exist. 


25Keokuk  &  Hamilton  Bridge  Co.  vs.  People,  161  111.  132  (1896). 
^Proceedings  State  Board  of  Equalisation,  1895,  p.  2. 
"Idem,  p.  4. 


24  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [24 

Next  in  order  is  the  consideration  of  the  difficulties 
of  the  Board  in  getting  data  for  an  accurate  administration 
of  its  duties.  The  revenue  law  provides  that  the  Auditor 
shall  devise  proper  blanks  for  the  statements  of  corpora- 
tions relative  to  capital  stock,  funded  debt,  assessed  tan- 
gible property,  etc.28  "Blank  number  five''  is  the  one  furn- 
ished. Each  corporation  is  bound  by  the  law  to  fill  out  this 
blank,  affix  its  sworn  subscription,  and  deliver  it  to  the 
assessor,  who  returns  it,  by  way  of  the  county  clerk  and  the 
Auditor,  to  the  Board  of  Equalization.  But  from  the  very 
first,  from  1873  down,  the  corporations  have  been  negligent 
and  reluctant  about  complying  with  the  law.  Some  of  this 
at  first  may  have  been  due,  as  the  Capital  Stock  Committee 
of  the  Board  reported  in  1877,  to  the  ignorance  of  the  cor- 
porations as  to  the  real  meaning  of  the  law.29  Many  of  the 
sworn  statements  which  were  returned,  were  defective. 
They  erred  especially  in  1873  in  reporting  their  funded 
debts  too  high  thinking  that  that  would  decrease  their 
assessments.  The  contrary  affect  resulted,  since  the  Board 
considered  the  value  of  the  bonds,  as  well  as  the  stocks,  in 
determining  the  valuation  of  the  corporation's  entire  pro- 
perty. Later  they  often  neglected  and  refused  to  supply 
this  information  in  regard  to  debt,  and  also  as  to  the  mar- 
ket or  actual  value  of  their  capital  stock.  And  every  annual 
report  of  the  Board  shows  that  many  corporations  do  not 
report  the  valuation  of  their  tangible  property  by  the  local 
assessors. 

In  case  of  the  refusal  of  a  corporation  to  make  out  and 
deliver  the  required  statemect  to  the  assessor,  it  is  his  duty 
to  fill  out  the  blank  the  best  he  can  and  return  it  to  the 
county  clerk.  But  the  local  assessors  have  very  often 
neglected  thus  to  co-operate  with  the  Board.  The  minutes 
of  the  Board's  Proceedings  frequently  complain  of  such 
dereliction  of  duty.30 

28Revenue  Law,  sec.  32.    See  above. 

^Proceedings  State  Board  of  Equalisation,  1877,  p.  63. 

^Proceedings  State  Board  of  Equalisation,  1873,  p.  150;  1870,  p.  63; 
1885,  p.  77;  1891,  p.  16;  1900,  p.  17.  This  latter  year  a  majority  of  the 
county  clerks  had  failed  to  return  corporation  statements  to  the  Board. 


25]  ASSESSMENT   OF   CORPORATE   EXCESS  25 

At  its  first  session  in  1873  the  Board  undertook  to  get 
the  required  data  from  the  corporations  by  exercising  its 
power  "to  examine  persons  and  papers."31  A  special  com- 
mittee armed  with  a  list,  furnished  by  the  Secretary  of 
State,  of  all  the  corporations  which  had  been  incorporated 
since  1865  went  to  Chicago  to  investigate.  They  sent  out 
circulars  to  the  corporations,  enclosing  "blank  number 
five",  asking  them  to  fill  it  out  and  return  it  to  the  Com- 
mittee, and  also  appointing  hours  for  the  hearings  of  cor- 
porations relative  to  the  assessment  of  their  capital  stock. 
But  most  of  the  corporations  declined  either  to  appear  or 
to  fill  out  the  blanks.  A  characteristic  reply  was  that  of 
the  Chicago  Chamber  of  Commerce.  The  President  of  that 
company  contended  that  the  $450,000  difference  between 
the  value  of  the  capital  stock  and  the  value  of  the  tangible 
property  was  "an  invisible  value  and  therefore  not  properly 
taxable  under  the  revenue  law".  Further,  he  declared  that 
if  the  revenue  law  should  be  construed  by  the  Board  so  as 
to  make  such  "invisible  value"  taxable,  the  Chamber  of 
Commerce  would  dispute  in  court  if  necessary  the  consti- 
tutionality of  the  revenue  law.32  The  next  year,  1874,33 
the  Board,  upon  request,  was  informed  by  the  Attorney 
General  that  they  were  not  empowered  to  compel  attend- 
ance of  corporations  for  examination,  and,  that  if  the  cor- 
poration refused  to  comply  with  the  law  and  the  local 
assessors  were  not  able  to  supply  the  required  information, 
the  Board  had  no  recourse  but  to  assess  the  corporation 
upon  the  information  which  it  could  obtain  otherwise.34 
This  opinion  was  later  sustained  by  the  Supreme  Court.35 

3JRevenue  law,  sec.  109. 

^-Proceedings  State  Board  of  Equalization,  1873,  p.  17.  The  Chamber 
of  Commerce  was  assessed  $305,000  in  1873 ;  $306,800  in  1874 ;  $216,800- 
in  1875. 

33The  constitutionality  of  the  revenue  law  having  been  upheld  by  the 
Sup.  Ct.  of  111. 

^Proceedings  State  Board  of  Equalization,  1874,  p.  5. 

85St.  Louis,  Vandalia  and  Terre  Haute  Ry.  Co.  vs.  Surrell,  88  111. 
535  (1878). 


26  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [20 

The  Attorney  General  further  informed  the  Board  that 
section  56  of  the  revenue  law  provided  a  penalty  for  any 
person  or  corporation  which  failed  or  refused  to  comply 
with  the  law  requiring  lists  and  statements.  The  section 
is  as  follows : 

Sec.  56.  If  any  person  or  corporation  shall  give  a  false  or  fraudulent 
list,  schedule  or  statement,  required  by  this  act,  or  shall  fail  or  refuse  to 
deliver  to  the  assessor,  when  called  on  for  that  purpose,  a  list  of  the  taxable 
personal  property  which  he  is  required  to  list  under  this  act,  he  or  it  shall 
be  liable  to  a  penalty  of  not  less  than  $10  nor  more  than  $2,000,  to  be 
recovered  in  any  form  of  action,  in  the  name  of  the  People  of  the  State 
of  Illinois,  on  the  complaint  of  any  person.  Such  fine,  when  collected,  to 
be  paid  into  the  county  treasury. 

But  the  fact  that  no  action  was  ever  brought  by  the 
Board  under  this  section  would  lead  to  the  suspicion  that 
the  Attorney  General  misconstrued  the  section.  In  fact 
in  1895  the  Auditor  of  Public  Accounts  in  his  biennial  re- 
port to  the  General  Assembly,  calls  attention  to  the  fact 
that  there  is  no  penalty  provided  for  the  refusal  or  neglect 
of  corporations  to  return  the  statements  required  by  sec- 
tion 32  of  the  revenue  law.36 

One  penalty,  however,  remained  within  the  power  of 
the  Board  to  inflict,  namely,  that  of  assessing  the  non-com- 
plying corporations  an  arbitrary  amount.  But  it  is  to  be 
feared  that  the  fact  that  corporations  could  refuse  to  sup- 
ply data  and  not  meet  with  severe  assessment,  in  fact  to 
slip  out  of  it  entirely,  may  largely  account  for  the  con- 
tinued difficulty  of  the  Board  in  getting  the  data. 

The  records  of  1875,  1876,  1877,  and  1884  show  that 
the  same  policy  was  continued  as  at  first,  namely,  to  send 
out  circulars  and  blanks  to  the  corporations  asking  them 
to  reply  and  inviting  them  to  appear  before  the  Board.37 
In  1877,  1878,  1879,  and  1882  the  records  show  that  Inves- 
tigating Committees  "sat"  in  Chicago.  (In  1894  a  proposal 
to  employ  experts  was  tabled.38)  That  some  data  were 

^Reports  to  General  Assembly,  1895,  Auditor,  page  viii. 
^Proceedings  State   Board   of  Equalisation,   18/5,  p.  6;    1876,  p.   5; 
18/7,  p.  13;  1884,  p.  10. 

**Idem,  1894,  p.  4.    Dahlman's  resolutions. 


27]  ASSESSMENT  OF  CORPORATE  EXCESS  27 

gathered  by  replies  to  the  Board's  letters  is  evidenced  by 
occasional  minutes  in  the  proceedings.39  In  1885  it  was 
seriously  proposed  by  the  Chairman  of  the  Capital  Stock 
Committee  to  draw  up  and  to  keep  a  record  book  of  corpor- 
ations which  are  subject  to  capital  stock  taxation.  But 
the  proposal  was  not  adopted.  In  1894  Mr.  Hearn  proposed 
to  make  it  a  rule  of  the  Board  that  only  sworn  statements 
of  corporations  be  accepted ;  and  that  in  case  of  refusal  of 
the  corporation  to  make  such  statement,  the  Capital  Stock 
Committee  should  assess  from  the  best  information  obtain- 
able. The  resolution  was  referred  to  the  Capital  Stock 
Committee,  which,  strange  to  say,  reported  unfavorably 
upon  it. 

One  almost  irrelevant  matter  here  begs  admission.  In 
1874  Mr.  Warner  offered  a  resolution  providing  that  "in 
the  absence  of  reliable  information  as  to  the  market  or  fair 
cash  value  of  the  capital  stock  and  debt  of  any  such  com- 
panies and  corporations,  the  fair  cash  value  of  the  assessed 
tangible  property  may  be  taken  as  the  value  of  the  shares 
of  such  capital  stock  and  debt."  The  resolution  was  not 
adopted.  The  next  year  it  was  again  voted  down.  The 
explanation  of  Mr.  Warner's  motion  may  be  inferred  from 
the  following  facts:  1.  Mr.  Warner  was  a  member  of  the 
Railroad  Committee.  2.  At  that  time  the  Capital  Stock 
Committee  was  assessing  "excess"  to  the  railroads.  3.  In 
1877  Mr.  Warner  was  chairman  of  the  general  rules  com- 
mittee at  the  time  of  the  organizing  of  the  new  board. 
4.  The  rules  committee  transferred  the  assessment  of  rail- 
road capital  stock  from  the  Capital  Stock  Committee  to 
the  Railroad  Committee.  5.  The  Railroad  Committee's 
final  report  makes  no  pretense  of  having  considered  the 
value  of  capital  stock  and  bonds  of  railroads. 

Mention  should  be  made  also  of  the  fact  that  the 
minutes  of  the  Proceedings  record  letters  from  individuals, 
from  a  "Tax  Payers'  Association",  from  the  Mayor  of 


^Proceedings  State  Board  of  Equalisation,  1875,  p.  8;  1877,  p.  19; 
1882,  p.  5. 


28  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [28 

Chicago,  from  the  "Tax  Investigating  Committee"  of  the 
Chicago  Teachers'  Federation,  and  others,  relative  to  the 
assessment  of  corporations.  Many  data  no  doubt  have  in 
that  way  been  offered  to  the  Board. 

The  following  table,  data  for  which  are  drawn  from  the 
tabulated  reports  of  the  Capital  Stock  Committee  of  the 
Board,  speaks  forcibly  of  the  difficulties  of  the  Board  in 
gathering  data. 

TABLE  I 


*•  ^.  *>  G 

•*•  2  "J2 

° 


I.                    i>  «  ^     U  "»               £)«  — 

_3  *»  _«—          £  v  _,' 

Pe  "3  3  e         Pe   - 

>*        3«°£S'.2      3  3  Si J 

A  AQ  •  C«         g,  o.  c  ta  . 

1873 a  a 

1874 116  52 

1875 67  oo 

1876 1796  252 

1877 2  4 

1878 a  a 

1879 14  6 

1880 10  ii 

1881 a  14 

1882 a  a 

1883 a  a 

1884 a  a 

1885 27  28 

1886 26  34 

1887 42  59 

1888 31  54 

1889 86  93 

1890 97  91 

1891 103  105 

1892 78  92 

1893 70  71 

1894 78  86 

1895 69  82 

1896 88  95 


a  Board  gives  no  data. 

b  25  no  capital  stock  report,  154  no  debt 


ftirsd 

l-Ss" 

*«£ 

«°S2 
£    »." 
*     .S  ""E  £s 

o      E'S  g  o  * 

&   |  s.«s°  s 

2O7 

Number  of  com- 
panies found  by 
Board  to  have  no 
^  value  "over  and 
above  tangible 
property" 

224 

100 

100 

147 

87 

22O 

*• 

3OI 

46 

360 

4O 

770 

20 

a 

61 

,  .  .  .  .   a 

01 

,  .  .  .  .   o 

8s 

a 

80  ... 

a 

114 

a 

148 

a 

217 

a 

246 

a 

284 

12 

0 

Vn 

,  .  .  .  .    II 

•122 

,  .  .  .  .    12 

237 

4 

240 

14 

252 

....    22 

251 

20 

29] 


ASSESSMENT  OF  CORPORATE  EXCESS 


29 


TABLE  I—  (Continued) 


>>o-o  v 

^3  £5  C3 


««  rt  t.  S 

" 


•Z  .2  £  *  : 
S  c  5  °  « 

S    n*    O    cj    ri 


1897  

"4 

1898  

109 

1899  

153 

1900  

138 

1901  

88 

1902  

1004 

1003  

944 

1004  

497 

1905  

843 

1906  

246 

1907  

977 

1908  

872 

1909  

400 

1910  

1076 

1911  

491 

135 
124 

187 

143 
134 
996 

815 
963 

977 

978 
788 
777 
750 
567 
206 


273 

236 

302 

266 

328 

1988 

1520 

1442 
I2l8 
1832 
1302 
I28l 

1168 

2153 

930 


42 

84 

68 
421 


1502* 

1290 

1024 

1234 
1117 


287 
275 


c  1504  companies  held  to  be  exempt  by  law ;  see  chapter  IV. 
d  1801  companies  held  to  be  exempt. 
e  2585  companies  held  to  be  exempt. 

After  the  matter  of  jurisdiction  and  of  data,  next  in 
order  is  the  examination  of  the  rules  by  which  the  Board 
assesses  the  "corporate  excess."  The  revenue  law  provides 
for  rules  as  follows: 

Section  3 such  board  shall  adopt  such  rules  and  principles 

for  ascertaining  the  fair  cash  value  of  such  capital  stock  (including  the 
franchise)  as  to  it  may  seem  equitable  and  just,  and  such  rules  and 
principles  when  so  adopted,  if  not  inconsistent  with  this  act,  shall  be  as 
binding  and  of  the  same  effect  as  if  contained  in  this  act,  subject  however, 
to  such  change,  alteration  or  amendment  as  may  be  found  from  time  to 
time  to  be  necessary  by  said  board 

On  September  10-12,  1873,  the  Board  formulated  and 
adopted  the  following  rules : 

Resolved,  That  for  the  purpose  of  ascertaining  the  fair  cash  value 
of  the  capital  stock,  including  the  franchise,  of  all  companies  and  associa- 
tions now  or  hereafter  created  under  the  laws  of  this  State,  and  for  the 


30  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [30 

assessment  of  the  same  or  so  much  thereof  as  may  be  found  to  be  in 
excess  of  the  assessed  or  equalized  value  of  the  tangible  property  of  such 
companies  and  associations  respectively,  we,  the  State  Board  of  Equaliza- 
tion, hereby  adopt  the  following  rules  and  principles,  viz:  First — the 
market  or  fair  cash  value  of  capital  stock,  and  the  market  or  fair  cash 
value  of  the  debt  (excluding  from  such  debt  the  indebtedness  for  current 
expenses)  shall  be  combined  or  added  together;  and  the  aggregate  amount 
so  ascertained  shall  be  taken  and  held  to  be  fair  cash  value  of  the  capital 
stock,  including  the  franchise,  respectively,  of  such  companies  and  asso- 
ciations. 

Second — From  the  aggregate  amount  ascertained  as  aforesaid,  there 
shall  be  deducted  the  aggregate  amount  of  the  equalized  or  assessed  valu- 
ation of  all  the  tangible  property,  respectively,  of  such  companies  and 
associations,  (such  equalized  or  assessed  valuation  being  taken,  in  each 
case  as  the  same  may  be  determined  by  the  equalization  or  assessment  of 
property  by  this  Board,)  and  the  amount  remaining  in  each  case,  if  any, 
shall  be  taken  and  held  to  be  the  amount  and  fair  cash  value  of  the 
capital  stock,  including  the  franchise  which  this  Board  is  required  by  law 
to  assess,  respectively  against  companies  and  associations  now  or  here- 
after created  under  the  laws  of  this  State. 

Expressed  in  every  day  language,  the  rules  mean  that 
the  value  of  each  corporation  as  a  "going  concern"  is  deter- 
mined by  adding  together  the  market  value  of  its  capital 
stock  and  bonds.  This  computed  value  of  the  company  as 
a  "going  concern"  is  then  taken  and  held  to  be  the  same  as 
the  value  of  all  of  the  corporation's  property  both  tangible 
and  intangible.40  Next  the  Board  determines  the  equalized 
value  of  the  tangible  property  as  locally  assessed.  Then  it 
subtracts  the  amount  of  this  value  of  the  tangible  property 
from  the  amount  of  the  value  of  both  tangible  and  in- 
tangible property,  and  the  remander,  if  any,  it  holds  to  be 
the  amount  which  it  is  required  by  law  to  assess — that  is, 
"value  of  the  capital  stock,  including  the  franchise,  over 
and  above  the  assessed  value  of  the  tangible  property." 

40This  is  an  interesting  feature  of  the  rules,  made  necessary  by  the 
attempt  of  the  legislature  to  adapt  the  old  general  property  tax  system  to 
modern  needs.  The  theory  underlying  the  general  property  tax  is,  that  the 
owning  or  control  of  property  is  the  best  index  of  a  person's  ability  to 
pay  taxes.  In  the  case  of  the  corporation  its  ability  to  redeem  bond  cou- 
pons and  to  pay  dividends,  fixes  on  the  market  the  valuation  of  its  stock. 
Then  by  this  rule  the  value  of  the  capital  stock  and  the  bonds  is  used  as  an 
index  of  the  value  of  the  corporation's  property. 


31]  ASSESSMENT   OF   CORPORATE   EXCESS  31 

These  rules  were  at  once  attacked  in  the  courts  of  the 
State  but  were  approved  by  the  Supreme  Court  in  its  Jan- 
uary term,  1875.41  And  many  times  since  then  they  have 
been  reapproved.42  The  next  year  the  law  was  attacked 
by  injunction  process  in  the  United  States  Circuit  Court, 
which  held  the  law  unconstitutional.  But  in  May,  1876,  the 
Supreme  Court  of  the  United  States  reversed  those  deci- 
sions43 and  put  its  stamp  of  approval  upon  the  Board's 
rules,  quoted  above,  by  declaring  them  to  be  "probably  as 
fair  as  any."  In  the  following  chapter  it  will  be  seen  how 
the  Courts  in  their  decisions  have  weighed  the  economic 
as  well  as  the  legal  points  in  favor  of  the  validity  of  the 
rules  and  the  principles  adopted  by  the  Board. 

At  this  point  the  opinion  of  economists  is  in  order. 
Professor  Seager,  writing  on  the  capital  stock  tax,44  ap- 
proves this  method  of  valuation  as  follows : 

The  plan  most  commonly  adopted  is  to  tax  the  corporations  them- 
selves, while  exempting  their  securities45  in  the  hands  of  owners 

by  a  board  of  state  assessors,  deduction  being  allowed  usually  for  real 
estate,46  and  sometimes  for  bonded  and  other  indebtedness,47  which  in 
such  cases  usually  escape  taxation  altogether.  In  its  most  highly  devel- 
oped and  defensible  form,  it  is  a  tax  on  the  capital  stock,  whose  value  is 
determined  by  the  prices  at  which  its  shares  are  selling  and  the  bonded 
indebtedness.  The  aggregate  value  of  the  stock  and  bonds  of  a  corpora- 
tion represent  its  worth  as  a  going  concern  from  the  point  of  view  of  the 
business  community  and  constitute  therefore  the  fairest  basis  for  meas- 
uring its  ability  to  contribute  to  the  government,  so  long  as  property  is 
accepted  as  the  test  of  such  ability. 

One  unwritten  rule  of  the  Board  in  assessing  the  "cor- 
porate excess"  has  been  left  out  of  the  discussion  so  far. 
Stated  baldly  it  is  as  follows:  Each  year  the  Board  by 
resolution  determines  how  much  the  local  assessors  of  the 

41  Porter  vs.  R.  R.  I.  &  St.  L.  R.  R.  Co.,  76  111.  561   (1875). 

42In  1875,  1876,  1877,  1878,  1880,  1901. 

"Details  given  in  separate  chapter. 

"Introduction  to  Economics  (1906),  page  556. 

43Stock  exempt,  but  bonds  not,  by  the  law  of  Illinois  (Sec.  32). 

4«Also  personalty  by  the  law  of  Illinois. 

47Bonds  are  not  exempt  by  the  law  of  Illinois. 


32  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  132 

State,  on  an  average,  have  undervalued  property  in  return- 
ing its  value.  Then  the  Capital  Stock  Committee  proceeds 
to  undervalue  the  capital  stock  and  bonds  of  corporations 
in  the  same  proportion.  Of  course,  such  action  is  not  a 
strict  fulfilment  of  the  requirements  of  the  law  which  calls 
for  the  "fair  cash  value".  Indeed,  between  fulfilling  the 
letter  of  the  revenue  law  which  requires  full  valuation  and 
fulfilling  the  fundamental  principle  of  uniformity  in  the 
revenue  article  of  the  constitution,  which  necessitates  a 
proportionate  undervaluation,  the  situation  of  the  Board 
of  Equalization  has  been  that  of  the  proverbial  man  be- 
tween the  devil  and  the  deep  sea.  The  minutes  of  the  Pro- 
ceedings frequently  show  that  conscientious  members  of 
the  Board  were  opposed  to  this  unwritten  rule.  In  this 
they  were  supported  by  the  unremitting  hostility  of  the 
Attorney  General  to  such  a  disregarding  of  their  duty  just 
because  local  assessors  were  disregarding  theirs  in  the 
matter  of  valuation.  And  later,  in  1887,  the  Supreme 
Court  likewise  sided  with  the  strict  constructionists.  On 
the  other  hand,  conscientious  members  of  the  Board  held 
that  the  principles  of  uniformity,  "fixed  in  this  constitu- 
tion", had  claims  to  fulfilment  prior  to  the  claims  of  the 
letter  of  the  revenue  law.  To  support  the  rule  they  could 
cite  decisions  of  the  Supreme  Court.  The  Capital  Stock 
Committee  in  1873  reported  as  follows:48 

The  decision  of  the  Supreme  Court  of  this  State  heretofore  made 
in  Bureau  County  and  in  other  cases,  will  compel  the  State  Board  in  its 
assessments  of  property,  to  adopt  as  its  basis  for  values  the  proportion  of 
the  actual  value  at  which  this  Board  finds  other  property  to  be  assessed. 

The  case  referred  to  by  the  Committee  was  heard  by 
the  Supreme  Court  in  1867.  The  Bureau  County  Board  of 
Supervisors  had  assessed  the  C.  B.  &  Q.  R.  R.  Company's 
property  at  from  one-third  to  one-half  of  its  actual  value 
regardless  of  the  fact  that  other  property  was  assessed  by 
local  assessors  at  only  one-fifth  to  one-third  its  actual  value. 
The  Court  held  that  the  uniformity  principle  of  the  consti- 

/ 

^Proceedings  State  Board  of  Equalisation,  p.  18. 


33]  ASSESSMENT   OF   CORPORATE   EXCESS  33 

tution  made  the  assessment  by  the  Board  of  Supervisors 
invalid.49 

The  Supreme  Court  in  1877  positively  approved  this 
unwritten  rule.  The  validity  of  an  assessment  on  an  indi- 
vidual's property  was  attacked  on  the  ground  that  the 
Board  had  not  assessed  corporations  as  the  law  required. 
But  the  Court  held  the  action  of  the  Board  was  proper,  as 
obeying  the  constitutional  mandate  requiring  uniformity 
rather  than  the  literal  terms  of  the  statute;  and  that  it 
could  work  no  injustice,  while  "a  strict  observance  of  the 
statute  in  that  respect  would  have  worked  injustice."50 

This  decision  would  seem  to  make  the  unwritten  rule 
vital  to  the  validity  of  the  operation  of  the  Board's  formally 
adopted  written  rules.  Yet  in  1887  when  a  case  came  up 
for  hearing  before  the  Supreme  Court  which  hinged  upon 
this  very  point  of  saving  the  uniformity  principle  by  dis- 
regarding the  law,  the  Court  held  opposite  to  what  it  did 
in  the  case  just  cited.  The  two  cases  are  not  identical ; 
hence  a  brief  statement  is  necessary.51  In  1886  a  railroad 
corporation  sought  an  injunction  to  restrain  the  collection 
of  taxes  on  an  assessment  by  the  Board  of  Equalization. 
They  alleged  it  to  be  illegal  on  the  ground  that  the  Board 
had  assessed  the  property  of  the  railroad  at  a  trifle  more 
than  full  value  regardless  of  the  fact  that  the  local  assessors 
had  assessed  property  in  the  same  township  at  only  one- 
third  of  its  full  value.  The  Circuit  Court  denied  the  petition 
to  enjoin  and  the  railroad  appealed  to  the  Supreme  Court. 
There  its  counsel  contended  that  the  Board  "to  preserve 
the  principle  of  uniformity  in  the  constitution''  must  assess 
corporation  property  at  the  same  fraction  of  its  value  that 
local  assessors  assessed  other  property  at.  The  Supreme 
Court  denied  the  validity  of  such  argument  and  affirmed 
the  decision  of  the  lower  court.  In  part  the  Court  said : 

"Board  of  Supervisors  of  Bureau  Co.  vs.  C.  B.  &  Q.  R.  R.  Co.,  44 
111.  229  (1867). 

°°Law  vs.  People,  87  111.  385  (1877). 

"I.  &  St.  L.  R.  R.  and  Coal  Co.  vs.  Stookey,  Collector,  122  111.  358 
(1887). 


34  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [34 

If  any  wrong  has  been  done,  it  was  by  the  town  assessors,  and  not 
by  the  State  Board.  The  law  required  the  State  Board  of  Equalization 
to  value  the  property  at  its  fair  cash  value  ....  All  this  was  done  in 
substantial  conformity  with  the  requirements  of  the  statute,  yet  the  action 
of  the  Board  is  assailed  .  .  .  The  appellant,  in  effect,  says  the  Board  should 
have  disregarded  this  law  because  the  town  assessor  had  done  so  in  the 
assessment  of  the  other  property  in  the  two  townships.  This  view  of  the 
matter  we  do  not  regard  as  sound. 

But  this  decision  seems  to  have  been  taken  by  the 
Board  as  a  vindication  of  that  one  assessment  of  theirs  on 
the  railroad  company  that  did  the  suing,  rather  than  as  a 
criticism  of  their  use  of  the  unwritten  rule  as  to  under- 
valuation. It  is  to  be  regretted  that  the  counsel  for  the 
railroad  company  did  not  base  his  plea  of  unjust  assess- 
ment on  the  ground  that  other  corporations  were  under- 
valued while  this  particular  corporation  was  not  under- 
valued. That  would  probably  have  brought  a  more  deci- 
sive opinion.  In  1891  the  question  was  up  again  in  the 
Board,  the  strict  constructionists  as  usual  in  the  minority. 
The  Attorney  General  was  requested  to  give  his  opinion  as 
to  whether  it  was  the  duty  of  the  Board  to  assess  corpora- 
tion property  "at  its  fair  cash  value  irrespective  of  the  fact, 
if  it  is  a  fact,  that  all  other  classes  of  property  in  the  State 
are  assessed  at  a  rate  much  less  than  their  cash  value."52 
Two  days  later  a  counter  resolution  was  passed  asking  the 
Attorney  General  whether  the  Board  should  equalize  its 
assessments  witli  those  made  by  local  assessors,  "so  that  all 
classes  of  property  throughout  the  State  bear  their  equal 
proportion  of  taxes  according  to  value."33  The  Attorney 
General  replied  that  they  must  assess  the  full  value  and 
cited  the  Supreme  Court  opinion  of  1887,  which  has  just 
been  quoted  from  above.  But  the  reply  of  the  Attorney 
General  was  not  allowed  to  be  presented1"'4  to  the  Board 

^Proceedings  State  Board  of  Equalization,  1891,  p.  6,  Aug.  25, 
Craske's  resolution. 

^Proceedings  State  Board  of  Equalization,  1891.  p.  /,  Collior's  reso- 
lutions. 

54Idem,  p.  10,  Sept.  2,  Jones'  motion  to  have  Attorney  General's  letter 
read  was  lost. 


35]  ASSESSMENT  OF  CORPORATE  EXCESS  35 

until  after  the  following  resolution  had  been  adopted  by  a 
vote  of  14  to  6 : 

Resolved,  That  it  is  the  sense  of  this  Board  that  all  property  assessed 
in  this  State  shall  be  so  equalized  that  it  shall  pay  its  just  and  equal  pro- 
portion of  the  burden  of  taxation. 

In  1894  the  question  bobs  up  again  in  the  minutes ;  the 
same  fate  is  recorded.  In  1898  at  its  special  session  for 
the  revision  of  the  revenue  law,  the  general  assembly  put 
its  stamp  of  approval  upon  this  unwritten  rule  of  the  Board 
by  providing  that  the  Board  in  its  assessments  just  as  the 
local  assessor  in  his  should  set  the  fair  cash  value  down  in 
one  column  to  be  headed  "full  value",  and  one-fifth  part 
thereof  in  another  column  to  be  headed  "assessed  value."55 
Yet  again  in  1902  the  Board  "determined  by  resolution" 
that  real  and  personal  property  had  been  valued  no  higher 
than  70  per  cent,  of  its  fair  cash  value.  The  inference  is 
that  the  Capital  Stock  Committee  undervalued  capital 
stock  and  bonds  of  corporations  in  that  same  proportion 
before  dividing  by  five  to  get  the  "assessed  value".  Other- 
wise the  resolution  as  to  the  70  per  cent,  valuation  was  of 
no  use  to  the  Board.36  In  1905  this  rule  of  "undervalua- 
tion" was  at  last  incorporated  in  the  written  rules  formally 
adopted  by  the  Board.57  Yet  that  did  not  down  the  ques- 
tion. In  1907  Mr.  Colburn  offered  a  resolution,  to  ask 
Attorney  General  Stead  whether  the  Board  had  any 
authority  to  assess  at  70  per  cent,  if  it  thought  local  assess- 
ors were  so  doing.58 

In  closing  on  this  point  it  is  safe  to  affirm  that,  judg- 
ing by  the  resolutions  passed  each  year  fixing  the  average 
rate  at  which  property  was  estimated  to  have  been  assessed 
locally,  also  judging  by  the  headings  in  the  tabulated  re- 
ports which  expressly  state  that  40  per  cent,  or  50  per  cent., 
as  the  case  might  be,  is  deducted  from  the  fair  cash  value 

55Laws  of  Illinois,  special  session,  1808,  p.  43. 
"Similar  resolutions  in  1003,  1905  and  1006. 
^Proceedings  State  Board  of  Equalization,  1905,  p.  12. 
58Idein,  1907,  p.  5,  Sept.  24.    On  Oct.  8,  Colburn  withdrew  the  resolu- 
tion. 


36  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [30 

"so  as  to  equalize  with  other  state  property",  and  judging 
by  the  later  headings  used  in  the  reports  from  1885  to 
1898,  "equalized  value  of  capital  stock  and  debt,  etc.",  it  is 
safe  to  affirm  that  the  Board  up  to  1898  inclusive,  used  the 
unwritten  supplement  to  its  formally  adopted  rules.  And 
the  reports  of  the  Board  from  1898  to  the  present  show 
compliance  with  the  law  of  1898  requiring  one-fifth  (in 
1909  the  proportion  was  fixed  by  statute  at  one-third)  of  the 
fair  cash  value  to  be  set  in  a  column  and  headed  "assessed 
value".  But  the  minutes  of  the  Proceedings  relative  to  the 
resolutions  determining  that  local  assessors  had  valued 
property  "no  higher  than  70  per  cent,  of  its  full  value" 
(one-fifth  or  one-third  of  which  is  set  down  as  "assessed 
value"),  and  the  formal  adoption  of  the  rule  in  1905,  show 
that  at  present  the  Board,  to  "preserve  the  principle  of 
uniformity"  in  taxation,  has  had  to  disregard  the  letter  of 
the  law  even  as  amended  in  1898.  In  fact,  the  United 
States  Supreme  Court,  Oct.  21,  1907,  held  that  a  failure 
to  do  so  was  a  violation  of  the  Fourteenth  Amendment. 

A  brief  history  of  the  Board's  proceedings  would  not 
be  complete  without  a  review  of  the  noted  mandamus  suit 
concerning  the  rules  for  assessing  corporations,  which  was 
brought  against  the  Board  in  1900-1901  by  the  Teachers' 
Federation  of  Chicago.59  The  main  points  brought  to  issue 
were:  1.  Could  the  Court  compel  the  Board  to  assess  cer- 
tain (Chicago)  corporations.  2.  Could  the  Courts  com- 
pel the  Board  to  use  the  old  rules  rather  than  a  new  set 
adopted  for  the  occasion.  The  following  statement  of  the 
case  is  essentially  that  expressed  by  Justice  Hand  in  ren- 
dering the  opinion  of  the  Supreme  Court. 

The  case  originated  in  a  petition  for  mandamus,  filed 
in  the  Circuit  Court  of  Sangamon  County60  upon  the  rela- 
tion of  Catherine  Goggin  and  Robert  C.  Steele,  against  the 
Board  of  Equalization  and  the  members  thereof  (naming 
them),  to  coerce  the  Board  and  the  members  thereof, 

59Bd.  of  Eq.  vs.  The  People  ex  rel  Catharine  Goggin  et  al.    Opinion 
of  Sup.  Ct.  filed  Oct.  24,  1901.     191  UK  528- 
60In  Nov.,  1000. 


37]  ASSESSMENT  OF  CORPORATE  EXCESS  37 

forthwith  to  value  and  assess,  in  the  manner  provided  by 
law,  the  capital  stock,  including  the  franchises,  of  twenty- 
three  Cook  County  corporations,  one  a  gas  company,  one  a 
telephone,  one  an  electric  light  company,  and  the  rest  street 
railway  companies.  It  was  alleged  that  the  fair  cash  value 
of  the  capital  stock,  including  franchises,  over  and  above 
tangible  property  assessed  to  them,  was  $235,000,000,  and 
that  the  Board  had  failed  and  refused  to  value  and  assess, 
and  were  intending,  as  theretofore,  to  fail  and  refuse  to 
value  or  assess  the  capital  stock  including  the  franchise, 
upon  a  fair  cash  value  thereof,  but  intended  to  value  and 
assess  it  in  such  manner  as  to  cause  said  corporations,  and 
each  of  them,  to  pay  no  capital  stock  tax. 

The  Board  demurred  to  the  petition's  being  heard.  But 
the  court  overruled  the  demurrer  and  the  suit  proceeded, 
whereupon  one  of  the  members,  Mr.  Solomon  Simon,  filed 
answer  confessing  the  alleged  intentions.  The  rest  of  the 
members,  severally,  and  jointly  as  a  Board  filed  answer, 
claiming  as  follows:  1.  That  some  of  the  corporations  in 
question  did  not  have  property  in  Cook  County  as  alleged 
on  April  1,  1900.  2.  That  the  Board  of  Equalization  alone 
had  jurisdiction  in  the  matter  of  valuing  and  assessing 
capital  stock  of  corporations.  3.  That  the  Board  had  not 
refused  to  assess  the  said  corporations,  in  that  it  had  not 
yet  completed  its  session.  During  the  time  between  actions 
in  court,  the  Board  of  Equalization  on  December  3,  1900, 
adjourned  without  having  valued  and  assessed  at  any 
amount  the  capital  stock  and  franchises  of  thirteen  of  the 
corporations  in  question.  It  did  value  seven  of  them  at  an 
amount  so  low,  as  is  contended  by  the  petitioners,  as  to 
amount,  in  law,  to  a  fraudulent  valuation  and  assessment, 
and  therefore  to  no  assessment  at  all.  In  arriving  at  the 
results  they  did,  the  Board  had  used  a  new  set  of  rules. 
Their  minutes  for  November  22, 1900,  show  that  on  motion 
of  Mr.  Cruttenden  the  established  rules  were  abolished  and 
new  ones  adopted,  under  operation  of  which  capital  stock 
was  to  be  valued  as  an  entirety,  consideration  to  be  given 
to  the  following :  1.  Character  and  duration  of  franchise ; 


38  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [38 

2.  Franchise  taxes  or  any  other  contribution  paid  to  cities ; 

3.  Highest  and  lowest  quotations  of  stock  and  amounts  of 
stock  sold  at  those  quotations ;  4.  Any  other  fact  or  condi- 
tion that  will  assist.    Thus  it  is  evident  that  the  bonds  of 
the  corporation  were  no  longer  to  be  considered  in  the  valu- 
ation of  the  corporation.    In  the  minutes  for  the  same  day 
it  appears  that  the  "courtesy  of  the  Board''  was  extended 
to  representatives  of  the  corporations  in  question,  who  ad- 
dressed the  Board  on  the  matter  of  assessing  the  capital 
stock  of  their  corporations. 

The  trial  court  held  that  these  new  rules  were  not  valid 
and  that  the  Board  should  have  used  the  established  rules ; 
also  held  the  assessment  under  the  new  rules  fraudulent. 
On  May  1,  1901,  the  Circuit  Court  of  Sangamon  County 
rendered  judgment  against  the  Board,  granting  the  writ  of 
mandamus  prayed  for  in  case  of  the  thirteen  corporations 
not  assessed  and  the  seven  held  to  be  fraudulently  assessed. 

Appeal  was  taken  by  the  Board  to  the  Supreme  Court 
and  was  heard  at  the  October  term.  "The  question  was 
not  whether  the  lower  court  had  power  to  review  the  judg- 
ment of  the  State  Board  of  Equalization  but  whether  when 
property  has  been  wrongfully  omitted  which  is  taxable, 
or  fraudulently  assessed  at  so  low  a  rate  as  to  amount,  in 
law,  to  no  assessment  at  all,  the  Court  may  compel  said 
Board  to  perform  its  duty."  The  Sangamon  County  Court 
held  that  since  the  Board's  power  was  that  of  original 
assessor,  and  not  of  review  in  the  case  of  corporations,  that 
the  performance  of  the  duty  may  be  enforced  by  mandamus. 

Justice  Hand  then  reviews  the  evidence  as  to  fraud  in 
the  assessment.  Eighteen  of  the  corporations,  including 
the  thirteen  which  were  not  assessed  at  all  by  the  Board, 
did  not  make  returns  as  directed  by  section  32  of  the  rev- 
enue law;  whereupon  the  statements  were  made  and  re- 
turned by  the  assessors  as  required  by  law,  and  by  the 
Auditor  these  were  turned  over  to  the  Board  of  Equaliza- 
tion long  before  the  petition  for  mandamus  was  filed. 
"Evidence  shows"  that  the  Tax  Investigating  Committee 
of  the  Chicago  Teachers'  Federation,  had  frequently  point- 


39]  ASSESSMENT   OF   CORPORATE   EXCESS  39 

ed  out  to  the  Board,  and  especially  to  the  Committee  on 
Capital  Stock,  that  the  assessments  for  previous  years  had 
permitted  the  said  corporations  to  escape  taxation  on  their 
capital  stock  including  the  franchises.  Further,  it  ap- 
peared from  the  evidence  that  the  value  of  the  capital  stock 
of  the  thirteen  companies  which  the  Board  had  failed  to 
assess  in  1900  amounted  to  $85,000,000 ;  and  that  said  com- 
panies, during  the  year  prior  to  April  1,  1900,  "earned  a 
guaranteed  dividend  of  from  6  to  36  per  cent,  per  annum." 
And  of  the  seven  corporations  which  were  assessed  by  the 
Board  in  1900,  the  Peoples'  Gas  Light  and  Coke  Company 
in  a  sworn  statement  of  Nov.  17,  1900,  had  admitted  pro- 
perty as  follows: 

1.  Paid  up  capital  stock $  28,668,800 

2.  Funded  debt   34,000,000 


Total $  62,668,800 

3.  Assessed     (full}     value    tangible 

property   15,526,785 


5)$  47,142,015 

|     9,428,403 

Hence  this  property  assessed  according  to  the  established 
rule  would  have  had  a  taxable  "corporate  excess"  amount- 
ing to  $9,428,403.  But  the  Board  had  assessed  it  only 
$450,000,  by  its  new  rules,  or  $8,978,403  less  than  it  should 
have  assessed  it.  And  this  was  not  considering  the  fact 
that  the  company  did  not  report  the  value  of  its  stock  at 
the  actual  market  value,  which  was  considerably  higher. 
Justice  Hand,  reviewing  the  evidence,  said  this  was  a  fair 
illustration  of  the  Board's  method  with  the  other  six.  Such 
assessment  the  Court  held  to  be  fraudulent.  Justice  Hand 
settled  the  second  issue  at  bar,  namely  whether  the  Courts 
could  compel  the  Board  to  use  the  established  rules  rather 
than  the  new  ones,  by  holding  that  since  the  Court  had 
held  that  an  assessment  might  be  impeached  for  fraudulent 


40  TAXATION  OP  CORPORATIONS  IN  ILLINOIS  [40 

high  assessment61  and  that  "valuation  must  be  the  result 
of  honest  judgment  and  not  of  mere  will",62  the  converse 
must  be  true,  and  "an  assessment  may  be  impeached  where 
it  has  been  fraudulently  made  at  too  low  a  rate."  The  ap- 
peal of  the  Board  was  accordingly  denied  and  the  lower 
court  directed  to  issue  the  mandamus  compelling  the  Board 
to  assess  the  other  twenty  of  the  corporations  in  question 
by  the  established  rules.  The  order  was  issued  on  Novem- 
ber 6th.  For  some  unknown  reason  the  Capital  Stock 
Committee  did  not  comply  with  the  order  till  November 
20th.  On  that  day  the  Committee  was  halted  in  its  per- 
formance of  the  duty  by  a  temporary  injunction  of  the 
United  States  Circuit  Court.  But  on  the  22nd  the  Com- 
mittee was  allowed  to  finish  the  assessment.  By  this 
assessment  the  1900  tax  valuation  of  the  corporations  in 
question  was  raised  about  $32,000,000. 

The  corporations  themselves  next  took  up  the  case. 
They  refused  in  1901  to  pay  the  back  taxes  on  the  new  1900 
assessment;  brought  suit  in  the  United  States  Circuit 
Court  after  the  supplementary  assessments  had  been  made ; 
the  collection  of  the  tax  on  this  assessment  was  in  large 
part  enjoined.  Judge  Peter  S.  Grosscup  held  that  the  sup- 
plementary assessment  had  been  made  under  "duress",  and 
was  not  on  a  proper  basis.  He  decided  that  the  assessment 
should  be  based  on  the  capitalization  of  net  earnings.  And 
on  this  base  the  companies  eventually  paid  taxes,  on  an 
additional  assessment  aggregating  $7,190,000  (The  Illinois 
Court  had  ordered  simply  that  the  Board  use  the  estab- 
lished rules  and  in  so  doing  they  had  assessed  the  twenty 
companies  an  additional  $32,732,000).  Including  the 
taxes  previously  paid,  the  franchise  corporations  under 
discussion,  for  1900  paid  taxes  on  a  total  valuation  of 
$21,034,000.  Judge  Grosscup  stated  in  his  opinion  that  the 
valuation  under  his  rule  would  approximate  those  made 
voluntarily  by  the  Board  in  1901 ;  but  he  was  twenty -five 

«i  Pacific  Hotel  vs.  Lieb,  83  111.  602  (1876). 

«2C.  B.  &  Q.  R.  R.  Co.  vs.  Cole,  75  111.  594  (1874). 


41]  ASSESSMENT  OF  CORPORATE  EXCESS  41 

per  cent,  lower  than  what  the  companies  paid  the  next  year. 
Appeal  was  made  by  the  State  to  the  United  States  Su- 
preme Court.  October  21,  1907,  the  Court  held  that  the 
injunction  was  valid.  It  was  held  that  the  State  of  Illinois 
through  its  Board  of  Equalization  had  not  given  the  pro- 
perty of  these  corporations  equal  protection  before  the  law. 
Other  corporations  had  been  assessed  at  one-fifth  of  65  per 
cent,  of  their  value;  these  at  one-fifth  of  the  full  value. 
Such  a  denial  of  equality  the  Court  held  to  be  a  violation  of 
the  Fourteenth  Amendment.63 

A  few  other  pertinent  facts  in  the  history  of  the 
Board's  assessment  of  corporations  may  now  claim  admis- 
sion to  this  article.  They  are  drawn  from  the  minutes  of 
their  published  Proceedings  and  will  be  given  in  chrono- 
logical order,  and  the  reader  may  draw  his  own  conclu- 
sions: I.  Aug.  18,  1891,  on  motion  of  Mr.  Craske,  the 
secretary  of  the  Board  was  instructed  to  prepare  a  tabu- 
lated statement  of  the  capital  stock  and  property  of  cor- 
porations that  were  subject  to  assessment  by  the  Board, 
as  shown  by  their  sworn  statements  for  the  present  year. 

II.  Sept.  1, 1891,  Mr.  Craske  moved  to  amend  the  rules  re- 
lating to  final  committee  reports  so  as  to  require  the  Rail- 
road and  Capital  Stock  Committee  reports  to  be  presented 
to  the  Board  at  least  fourteen  days  before  the  adjournment 
sine  die,  and  that  those  reports  be  open  to  alteration  or 
amendment  for  ten  days  after  presentation  to  the  Board. 
Lost  by  vote  of  3  to  12.     Craske,  Jones,  Powrers,  for  it. 

III.  Sept.  15,  on  motion  of  Mr.  Neff,  Chairman  of  the 
Capital  Stock  Committee,  the  order  of  Aug.  18,  was  rescind- 
ed on  the  ground  that  it  was  impracticable.64    IV.  Oct.  3, 
1892,  Mr.  Jones  moved  that  the  Capital  Stock  Committee 
make  a  special  report  on  the  assessment  of  the  Pullman 
Company65  showing  the  manner  in  which  it  arrived  at  the 
same.    Lost  by  vote  of  6  to  13.    Craske,  Jones,  Powers,  for 

83Raymond  vs.  (Chicago)  Union  Traction  Co.,  207  U.  S.  20  (1907). 
^Proceedings  State  Board  of  Equalization,  1891,  Sept.  15. 
65See  Table  VII. 


42  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [42 

it.  Mr.  Powers  then  moved  that  a  day  be  fixed  by  the  Capi- 
tal Stock  Committee  for  hearing  other  members  of  the 
Board  relative  to  the  Pullman  Company's  assessment. 
Withdrawn  under  agreement  that  such  hearing  would  be 
granted. 

V.  Sept.  25,  1894,  Governor  Altgeld  addressed  the 
Board  on  the  subject  of  the  Pullman  Company's  assess- 
ment, presenting  to  the  Board  a  written  communication, 
together  with  exhibits  relative  to  the  value  of  the  capital 
and  the  property  of  the  company  subject  to  taxation  in 
Illinois.    Keferred  to  Capital  Stock  Committee.66 

VI.  Oct.  23,  1901  (day  before  mandamus  decision  was 
handed  down) .    Petition  and  list  presented  by  a  committee 
of  the  Chicago  City  Council  received  and  referred  to  the 
Committee  on  Capital  Stock.     VII.  Nov.  12,  1901,  com- 
munication from  Mayor  Harrison  requesting  permission  of 
the  Board  to  allow  a  committee  from  the  Chicago  City 
Council  to  examine  the  report  of  the  Capital  Stock  Com- 
mittee.   Laid  on  the  table.    VIII.  Dec.  4,  1901,  Board  ad- 
dressed by  the  general  counsel  of  the  Northwestern  Rail- 
road Company  relative  to  assessment  of  the  capital  stock 
and  franchise  of  corporations. 

IX.  Nov.  7,  1906,  motion  to  revise  rules  so  as  to  have 
Railroad  and  Capital  Stock  Committee  reports  lie  on  the 
table  10  days  for  inspection.  Lost.  X.  Dec.  7,  1906,  com- 
munication from  J.  Hamilton  Lewis,  Chicago  Corporation 
Counsel,  asking  to  be  permitted  to  appear  before  the  Board 
sitting  as  a  Committee  of  the  Whole  on  the  assessment  of 
Pullman  and  other  Chicago  corporations;  also  criticising 
the  Board  for  not  replying  to  his  previous  letters  and  for 
notifying  three  corporations  of  Chicago  of  hearings  before 
the  Board  and  not  notifying  him  or  the  Attorney  General's 
office. 

These  facts  are  to  be  kept  in  mind  when  later  is  consid- 
ered the  matter  of  the  Board's  efficiency  as  an  assessor  of 
corporations. 

"See  Table  VII. 


43]  ASSESSMENT  OF  CORPORATE  EXCESS  43 

The  tabulated  reports  of  the  Capital  Stock  Committee 
of  the  Board  are  often  lacking  in  data  which  a  student  of 
the  inner  workings  of  the  process  of  taxing  corporations 
would  like  to  examine.  The  following  facts  are  shown  at 
times  in  the  reports.  For  convenience  they  are  numbered 
so  as  to  be  more  easily  worked  into  a  tabulated  form. 

1.  Name  of  the  corporation. 

2.  Location ;  county  and  town  or  city. 

3.  Capital  stock  paid  up. 

3a.  Asterisks  used  to  denote  the  fact  that  certain  com- 
panies did  not  make  sworn  statement  as  required  by  section 
32  of  revenue  law. 

3b.  No  asterisks  but  a  row  of  dots,  indicating  probably 
that  such  statements,  if  made,  were  defective. 

4.  Total  indebtedness,  except  for  current  expenses. 
4a.  and  4b.,  similar  to  3a  and  3b. 

5.  Market  or  actual  value  of  paid  up  capital  stock  and 
debt  as  determined  by  the  Board. 

6.  Capital  stock  and  debt  as  equalized  with  the  aggre- 
gate assessment  of  the  state. 

6a.    Also  indicating  the  per  cent,  of  deduction  made. 

7.  Total  equalized  value  of  tangible  property  assessed 
where  located. 

7a.  Asterisks  indicating  no  report  of  tangible  prop- 
erty by  certain  companies. 

7b.  No  asterisks  but  a  row  of  dots,  indicating  prob- 
ably that  such  statements,  if  made,  were  defective. 

8.  "Assessed  and  equalized  value  of  capital  stock, 
being  excess  of  equalized  value  of  capital  stock  and  debt 
over  equalized  value  of  tangible  property." 

9.  A  separate  list  of  the  companies  examined  and 
found  to  have  no  "excess"  over  equalized  tangible  property 
assessment. 

9a.  Same  facts  shown  by  blank  space  in  column  for 
data  number  8. 

9b.     Otherwise  indicated. 

10.  Separate  list  of  the  companies  examined  and 


44 


TAXATION  OF  CORPORATIONS  IN  ILLINOIS 


[44 


found  under  the  law  to  be  exempt  from  "corporate  excess" 
assessment. 

lOa.    Same  facts  suggested  by  blank  spaces  in  columns 
5,  6,  6a,  7,  and  8;  e.g.,  1875. 


TABLE  II 


Year.. 1,    2,     3.     3a,     3b,     4,     4a,     4b,     5,     6,     6a,     7,     7a,     7b,     8,     9,     9a,     9b,     10,      lOa 


1873  . 

,  2, 

8,   , 

,  9b 

1874  
1875  
1876  

,  2, 
,  2, 
,  2, 

3, 
3, 
1 

..... 

3b,  4, 
3b,  4, 
3b,  4, 

.....  4b,  5, 
.....  4b,  5, 
.....  4b,  5, 

6. 
6, 
6, 

.  6a, 
6a, 
6a 

7, 
7, 
7 

..... 

7b, 
7b, 
7b 

8,  ... 
8,  .., 
8,  .., 

9a  ,  ..... 
9a  ,  ..„, 
9a,    ,    , 

lOa 
lOa 

1877 

,  2, 

3b,   , 

.  .,    ,5, 

6, 

6a, 

7, 



7b, 

8,  9, 
8,  9, 

1878  

,  2, 

1879  

,  2, 

3b,  ... 

.....  .....  5, 

6, 

0. 

f, 

6a, 
6a, 

6a, 

7, 
7. 

7, 

..... 

7b, 
7b, 

8,  9, 

8.  ... 
8, 

--  •-  ' 

— 

1880  
1881  

,  2, 
,  2, 

-, 

..... 

3b,  ... 

....,  5, 
,  5, 

1882  

,  2, 

8,   , 

1883  

,  2, 

8,  ... 

1884  

,  2, 

8,  ... 

1885  

,  2, 

j 

3a 

r, 

7, 

7a 

8,  ... 

1886  

,  2, 

j 

la 

3b,  ... 

6 

7 

7a 

8,  ... 

9a,    ,  ..... 

1887  

,  2, 

^ 

la, 

3b,  ... 

6, 

7, 

7a 

7b, 

8,  .  , 

9a,    ,  ..  , 

1888. 

,  2, 

j 

f. 

7 

7a 

7b, 

7b, 
7b, 
7b, 
7b, 

8, 

1889  
1890  
1891 

,  2, 
,  2, 
,  2, 

3, 
3, 
1 

3a, 
3a, 

.....  ... 

--,  . 

6, 

6. 
6, 

..... 

7, 
7, 
7, 

7, 

7a, 
7a, 
7a, 

8,  ... 
8,  -, 
8, 

9a  ,  , 
9a,  .....  ..... 
9a,    ,    , 

— 

1892 

,  2, 

la 

3b,  ., 

8, 

9a,    ,    , 

— 

1893  

,  2, 

j 

3b,  ... 

7 

7h 

8,  ... 

9a,  .....  ..... 

1894  
1895  
1896  
1897  
1898  
1899 

,  2, 
,  2, 
,  2, 
,  2, 
,  2, 
.  2. 

3, 
3, 
3, 
3. 
3, 

3a, 
3a, 
3a, 
3a, 
3a, 

3b,  .., 

7, 

7a 

7b 

8,  ... 

9a,  .....  

3b,  ... 
3b,  ... 
3b.  ... 
3b,  ... 
3b,  .  , 

.....  .....  5, 

6 

6a 

7, 
7. 
7, 
7, 

7, 

7a, 
7a, 
7a, 
7a. 

7a 

7b, 
7b, 
7b, 
7b, 
7b 

8.  ... 
8,  ... 
8,  ... 
8,  ... 
8,   , 

9a  ,  ..... 
9a,  .....  ..... 
9a  ,  ..... 
9a,  , 
9a,  .  

— 

1900    1,  2, 

. 

In, 

3b,  ., 

.  ,  ....  5, 

6 

6a 

7, 

7a 

7b 

8, 

9a,    ,    , 

1901    1,  2, 

T, 

3b,   , 

-,  5, 

6 

6a 

7, 

7a, 

7b, 

8,  ., 

9a,    ,   ., 

— 

1902  ....I,  2, 

la 

3b,  ... 

.....  .....  5, 

t, 

6a 

7, 

7a 

7b 

8,  9. 

.....  .-,  10, 

1903  .  ..1,  2, 

j 

la 

3b,  ... 

,    ,  5, 

f, 

6a 

7 

7a 

7b 

8,  9, 

.....  ..„,  10, 

1904  1,  2, 
1905  1.  2, 
1906  1,  2, 
1907  1,  2, 
1908    1,  2, 

3, 
3, 
3, 
3, 

1, 

3a, 
3a, 
3a, 
3a, 

3b.  ... 
3b,  .., 
3b,  ... 
3b,  ... 
3b,   , 

.....  .....  5, 
.....  .....  5, 
,  5, 
.....  .....  5, 
.....  .....  5, 

6. 
6. 

6. 
6. 
f, 

6a, 
6a, 

6a, 
6a, 
6a 

7, 
7. 
7, 
7, 

7 

7a, 
7a, 
7a, 
7a, 
7a 

7b, 
7b, 
7b, 
7b, 
7b 

8,  9. 
8,  9, 
8,  9, 
8,  9, 
8,  9, 

— 

—  —  

— 

1909  1,  2, 
1910  1,  2, 
1911  1,  2, 

3. 
3, 
3, 

3a, 

n 

3b,  ... 

3b,  ... 

3b,  ... 

.....  5. 
....  .....  5, 
.....  .....  5, 

(.. 
6, 

('. 

6a, 
6a, 
6a, 

7. 
7. 

7. 

7a, 

7b, 

7b. 

7b, 

8,  9, 
8,  9, 
8,  9, 

.....  .....  ..... 

— 

"In  the  year  1910  the  Board  of  Equalization  began  to  tabulate  corporations  in  three 
schedules  instead  of  two.  Schedule  A  contains  those  corporations  which  made  their  returns  as 
provided  by  law.  Schedule  B  contains  those  that  failed  to  comply  with  the  law  requiring  returns. 
Schedule  C  contains  the  names  of  those  which  were  found  to  be  fully  assessed  by  the  local 
assessors,  i.  e.,  the  Board  deemed  the  value  of  capital  stock  and  franchise  and  tangible  property 
to  be  no  more  than  the  value  assessed  to  the  tangible  property  by  the  local  assessor. 


45]  ASSESSMENT  OF  CORPORATE  EXCESS  45 

From  the  table  given  on  the  preceding  page  may  be 
readily  discovered  what  data  were  given  to  the  Board,  and 
what  not  given,  in  any  year.  It  shows  also  how  the  reports 
of  the  Board  have  varied  from  time  to  time.  For  example, 
by  consulting  column  "3a"  it  is  seen  that  in  1885  the  Board 
began  to  mark  certain  companies  with  an  asterisk  to  indi- 
cate that  they  did  not  report  their  capital  stock.  Column 
"3b"  shows  that  in  many  years  there  were  reports  which 
were  defective.  Again,  a  glance  horizontally  at  the  data 
furnished  in  the  Board's  published  proceedings  as  shown 
in  the  table  for  the  years  1882, 1883  and  1884,  discloses  the 
fact  that  the  Board  in  those  years  reported  nothing  but  the 
name,  location  and  assessment  of  the  corporations. 

From  the  meager  data  afforded  in  some  reports,  it  is 
small  wonder  that  members  of  the  Board  who  were  not  on 
the  Capital  Stock  Committee  should,  as  shown  above,  have 
tried  to  get  the  reports  laid  over  for  several  days.  The 
rules  of  the  Board  have  always  provided  that  the  Capital 
Stock  Committee's  report  shall  lie  on  the  table  at  least  two 
days.  But  the  suspension  of  the  rule  has  been  more  hon- 
ored than  the  rule.  Since  1890  at  only  five  sessions  has  the 
report  lain  over  the  whole  two  days.  In  1891-1893,  1896, 
1897,  1900-1904,  1906-1908  the  rules  were  suspended  and 
the  report  adopted  as  reported.  In  all  the  years  once  only 
was  the  report  amended.  That  was  in  1890  when  f  285,000 
was  cut  off  the  assessment  on  the  Union  Stock  Yards  be- 
cause a  like  amount  had  been  assessed  to  the  Stock  Yards 
Company  by  the  Railroad  Committee  on  account  of  the 
company's  railroad  tracks. 

If  the  Capital  Stock  Committee  had  each  year  pub- 
lished definite  information  as  to  the  corporations  whose 
statements  required  by  law,  were  lacking,  or  defective,  and 
also  the  names  of  the  assessors  and  county  clerks  who  had 
failed  to  do  their  duty  in  the  matter,  as  explained  above, 
it  would  have  been  possible  for  other  members  of  the  Board 
and  for  outsiders  interested  in  the  matter  of  taxing  cor- 
porations, to  assist  the  Capital  Stock  Committee  in  over- 
coming the  difficulties  in  regard  to  getting  proper  data. 


46  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [46 

Further,  if  the  Committee  had  shown  definitely  in  its  tabu- 
lated reports  the  actual  data  as  to  the  full  valuation  set 
against  each  corporation,  and  the  actual  deductions  made 
in  such  valuation,  considerable  adverse  criticism,  especially 
that  shown  above  as  coming  from  within  the  Board  itself, 
might  have  been  avoided.  Further,  the  study  of  the  Board's 
history  seems  to  warrant  a  logical  conclusion  that  the  Cap- 
ital Stock  Committee  always  has  the  situation  under  con- 
trol. It  does  its  work  practically  as  a  closed  body  but 
under  cover  of  a  diffused  responsibility.  And  here  is  the 
place  to  state  the  fact  that  the  Board  is  responsible  to  no 
one  but  the  people.  The  people  cannot  center  the  responsi- 
bility for  the  Board's  action  upon  any  state  officer.  When 
they  elect  the  Board  it  is  at  the  general  election  where 
partisan  policies  are  uppermost,  and  where  at  best  the 
people  inquire  only  into  the  record  of  the  state  officers. 
The  Board  of  Equalization  is  forgotten. 

The  general  conclusion  as  to  the  efficiency  of  the  Board 
of  Equalization  as  an  assessor  of  corporations  is  reserved 
for  the  last  chapter. 


CHAPTER  III. 

COLLECTION  OF  CORPORATION  TAXES: 
"CORPORATE  EXCESS"  SYSTEM  TESTED  IN  COURTS. 

The  collection  of  corporation  taxes,  with  the  excep- 
tion of  those  from  telegraph  and  railroad  companies,  is 
the  same  as  from  other  general  property  taxpayers.  The 
law  provides  that  the  local  assessor  shall  value  and  assess 
the  tangible  property  of  the  corporation,  and  that  the 
assessment  of  "corporate  excess"  shall  be  certified  by  the 
Auditor,  under  direction  of  the  Board  of  Equalization,  to 
the  county  clerk  of  the  county  in  which  the  corporation  is 
located.  The  county  clerk  then  extends  the  taxes  for  all 
purposes  on  that  amount  the  same  as  upon  the  other  prop- 
erty of  the  town,  district,  village  or  city  in  which  the  cor- 
poration is  located.1  Thus  all  the  property  of  a  corpora- 
tion becomes  subject  to  the  state,  county,  town,  district  and 
municipal  rates.  It  pays  its  general  property  tax  to  the 
regular  collector  of  such  taxes.  However,  in  the  case  of 
telegraph  companies,  the  law  provides  that  the  Board  of 
Equalization  shall  distribute  the  "corporate  excess"  among 
the  counties  the  same  as  "railroad  track"  and  "rolling 
stock"  valuations  are  distributed,  that  is,  by  giving  each 
county  such  a  percentage  of  the  total  "excess"  as  its 
number  of  miles  of  telegraph  lines  is  a  percentage  of  the 
total  number  of  miles  in  all  the  counties  where  the  com- 
pany does  business.2  Further,  the  law  provides  that  the 
tax  shall  be  collected  by  the  county  collector3  the  same  as 
railroad  taxes  are  collected.  However,  the  taxes  on  wires, 
poles,  buildings,  office  furniture,  etc.,  are  collected  by  the 
local  collectors. 

1Revenue  Law,  section  108. 

^Proceedings    State  Board  of  Equalisation,  1873,  p.  157. 

3Revenue  law,  section  54. 

•     47 


48  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [48 

The  collection  of  the  general  property  tax,  levied  on 
corporations  as  result  of  the  new  method  instituted  in  1873 
for  reaching  intangible  property,  was  at  the  start  resisted 
in  both  the  State  and  United  States  Courts.  The  consti- 
tutionality of  the  "corporate  excess"  method  was  tested 
in  the  State  Supreme  Court  in  1875  and  in  the  United 
States  Supreme  Court  in  1876.  Since  then  the  attack  has 
been  upon  the  legality  or  validity  of  the  assessments  by  the 
State  Board  of  Equalization. 

The  favorite  resort,  at  law,  to  resist  the  collection  of 
taxes  on  the  "corporate  excess"  and  attacking  this  system 
in  general,  has  been  the  use  or  attempted  use  of  court 
injunctions.  As  pointed  out  by  Justice  Miller  of  the 
United  States  Supreme  Court,  this  method,  because  of  the 
long  drawn  out  litigation  involved,  is  detrimental  to  the 
interests  of  the  state,  but  profitable  to  the  corporation.4 
The  state  often  badly  needs  the  tax  money  tied  up  by  the 
litigation.  The  corporation  has  the  "tied  up"  sum  to  use 
in  business. 

From  the  biennial  report  of  the  Auditor  of  State  for 
the  years  1873  and  1874  it  is  learned  that  the  collection  of 
the  tax  extended  against  the  assessed  value  of  the  capital 
stock  of  corporations  was  resisted  in  the  courts  by  nearly 
all  the  railroads  in  the  state,  and  by  many  other  corpora- 
tions. A  series  of  cases  known  as  the  "Tax  Injunction 
Cases",  involving  all  the  questions  at  issue,  were  heard 
and  decided  at  the  January  term  (1875)  of  the  Supreme 
Court.  The  Court,  in  the  opinions  which  were  filed  on  the 
19th  of  June,  1875,  sustained  the  constitutionality  of  the 
revenue  law  of  March  30,  1872,  and  the  validity  of  the 
action  of  the  Board  of  Equalization  under  it  in  all  particu- 
lars, except  that  of  the  assessment  of  the  Western  Union 
Telegraph  Company,  a  foreign  corporation.5 

But  in  the  meantime  or  immediately  after  these  opinions  were  made 
public,  manj-  of  these  corporations,  (including  nearly  all  the  railroads  in 

4Tax   Injunction  Cases  of  U.   S.  Circuit   Court  Illinois  reviewed  by 
Supreme  Court  in  1876.    State  Railroad  Tax  Cases,  II  Otto  585  ff. 
"Porter  vs.  R.  R.  I.  &  St.  L.  R.  R.  Co.    76111.561.    (1875). 


49]         COLLECTION  OF  CORPORATION  TAXES          49 

the  state,)  procured  in  the  Courts  of  the  United  States  injunctions  against 
the  collection  of  the  tax  against  their  capital  stock.  It  follows  that  but  a 
small  percentage  of  the  tax  levied  in  1873  upon  the  capital  stock  of  corpora- 
tions has  been  collected.6 

In  fact,  the  United  States  Circuit  Court  in  April,  1875, 
declared  the  revenue  law  of  1872  to  be  unconstitutional 
and  issued  permanent  injunctions  against  the  collection 
of  the  tax  on  the  capital  stock  "excess".  Three  railroad 
injunction  cases  were  by  the  State  carried  to  the  Supreme 
Court  of  the  United  States,  where,  in  a  notable  opinion 
delivered  by  Justice  Miller  in  May,  1876,  the  injunction 
was  ordered  to  be  dissolved.  The  Court  ordered  further 
that  "it  is  essential  that  every  case  be  brought  within 
some  of  the  recognized  rules  of  equity  jurisdiction  and 
that  neither  illegality  nor  irregularity  in  the  proceedings, 
nor  error,  nor  excess  in  the  valuation,  nor  hardship  or 
injustice  of  the  law,  provided  it  be  constitutional,  nor  any 
grievance  which  can  be  remedied  by  a  suit  at  law,  either 
before  or  after  the  payment  of  the  tax, — will  authorize 
the  issue  of  an  injunction  against  its  collection."  All  this 
was  on  the  ground  that  the  maintenance  of  the  state  must 
not  be  threatened  by  long  drawn  out  litigation  that  with- 
holds tax  money  from  the  treasury  to  the  detriment  of  the 
state  (and  profit  of  the  corporation).  In  stating  the  gen- 
eral cases  in  which  injunctions  might  be  issued  the  Jus- 
tice approved  the  rules  laid  down  by  the  Illinois  Supreme 
Court  in  1864,7  namely,  that  "a  court  of  equity  should  not 
enjoin  collection  of  taxes  except  where  the  tax  is  unauthor- 
ized by  law,  or  assessed  on  property  not  liable,  where 
injury  irreparable  would  be  done,  or  a  multiplicity  of  cases 
would  occur."  Further,  the  United  States  Supreme  Court 
held  that  no  injunction,  preliminary  or  final,  can  be 
granted  to  stay  collection  of  taxes  until  it  is  shown  that 
all  taxes  conceded  to  be  due,  or  which  the  Court  can  see 
ought  to  be  paid,  or  which  can  be  shown  to  be  due  by  affl- 

"Auditor  of  Public  Accounts,  Reports  to  General  Assembly,  vol.   I, 
p.  106. 

7Cook  County  vs.  C.  B.  &  Q.  R.  R.  Co.,  35  111.  465  (1864). 


50  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [50 

davits,  have  been  paid,  or  tendered  without  demanding  a 
receipt  in  full.8 

Further,  the  lower  United  States  courts  were  in- 
structed to  follow  the  construction  of  the  Illinois  statutes 
that  was  placed  upon  them  by  the  Illinois  Supreme  Court. 

A  summary  of  what  was  held  in  the  opinions  of  the 
State  and  United  States  Supreme  Courts  of  1875  and  1876 
in  sustaining  the  constitutionality  of  the  revenue  law  will 
show  the  issues  that  were  raised  and  settled  in  regard  to 
the  constitutionality  of  the  "corporate  excess"  method  of 
taxing  corporations.  In  following  this  discussion,  refer- 
ence should  be  made  to  the  exact  wording  of  the  consti- 
tution, which  has  been  given  in  chapter  I.  The  main 
points  of  the  Illinois  Supreme  Court  decision  in  1875  were 
as  follows: 

1.  The  legislature  has  plenary  power  to  tax  as  re- 
stricted by  the  constitution  of  the  state  and  the  laws  and 
constitution  of  the  United  States.9 

2.  Article  IX,  Section  I,  of  the  constitution  does  not 
require  that  the  legislature,  in  providing  for  the  taxation 
of  corporations,  shall  designate  the  precise  amount  which 
each  corporation  shall  pay,  and  that  this  shall  be  the  same 
on  each  corporation,  without  regard  to  the  franchise  value 
or  the  privileges  enjoyed,  nor  that  such  taxation  shall  be 
of  like  character  with  that  which  may  be  imposed  on  inn- 
keepers and    others    pursuing    the    particular  vocations 
named.     This  part  of  the  constitution  only  requires  that 
the  tax  upon  corporations  shall  be  by  general  law,  and  the 
only  uniformity  is  as  to  the  class  of  corporation. 

3.  The  mode  of  taxing  corporations  is  discretionary 
with  the  legislature. 

4.  The  assessment  of  property  may  be  given  to  differ- 
ent officers. 

8State  Railroad  Tax  Cases,  II  Otto  585  (1876). 

•Limitations  in  regard  to  taxing  of  capital  stock  of  national  banks 
(See  chapter  IV)  ;  also  in  regard  to  levying  taxes  which  may  be  construed 
to  be  infringment  of  federal  power  to  regulate  commerce. 


51]         COLLECTION  OF  CORPORATION  TAXES          51 

5.  The  power  given  to  the  State  Board  of  Equaliza- 
tion is  not  a  delegation  of  legislative  power. 

6.  The  legal  property  of  a  corporation  is  distinct  from 
that  of  the  individuals  who  make  up  the  corporation.    This 
was  brought  out  by  the  plea  of  the  corporation  counsel  that 
the  corporation  as  a  person  did  not  own  any  capital  stock, 
but  that  that  belonged  to  the  individual  shareholders,  and 
was  properly  taxable  to  them  only.    But  the  Court  denied 
such  argument  and  held  that  the  corporation  was  properly 
taxable  upon  its  capital  stock  including  the  franchise.10 
The  Court  especially  noted  the  fact  that  the  franchise  privi- 
lege of  doing  business  under  corporate  organization  writh 
limited  liability  was  a  valuable  privilege  and  justly  taxa- 
ble.   Further,  the  Court  held  that  the  franchise  is  property 
and  the  fact  is  not  lessened  by  reason  of  the  difficulties 
attaching  to  the  matter  of  making  a  just  valuation  of  it. 
On  this  point  Cooley  says :    "A  state  may  tax  the  franchise 
or  the  capital  of  a  corporation  by  such  rule  as  it  may  pre- 
scribe, even  though  it  be  arbitrary."11 

Before  the  United  States  Supreme  Court  R.  G.  Inger- 
sol,  counsel  for  the  appellees,  argued  as  follows:  The 
Constitution  of  Illinois  places  the  property  of  corporations 
and  individuals  upon  an  equality.  By  the  revenue  law  of 
1872  corporations  are  denied  privileges  and  rights  accorded 
to  individuals  and  hence  the  law  is  unconstitutional.  The 
Court  denied  the  validity  of  the  argument.  In  the  second 
case,1-  corporation  counsel  insisted  that  the  assessments 
of  the  Board  of  Equalization  under  the  new  law  were  pro- 
hibited by  the  Fourteenth  Amendment  to  the  constitution. 
But  the  Court  considered  that  argument  as  scarcely  worth 
a  reply,  and  declared  in  denial  of  all  argument  that  the 
revenue  law  of  March  30, 1872,  violated  neither  the  Consti- 
tution of  Illinois  nor  of  the  United  States. 

10Citing  opinion  of  U.  S.  Supreme  Court,  Van  Allen  vs.  The  Asses- 
sors, 3  Wallace  583  (1865). 

"Cooley  cites  United  States  Supreme  Court  decisions,  Minot  vs.  Phila- 
delphia, etc.  R.  R.  Co.,  18  Wallace  206  (1873). 

"There  were  three  cases  heard  at  the  same  sitting. 


52  TAXATION   OF  (OIU'OUATIONS  IX  ILLINOIS  [52 

In  the  second  place,  in  connection  with  the  argument 
as  to  the  unconstitutionally  of  the  revenue  law,  the 
Board's  interpretation  of  the  law  and  the  legality  of  its 
acts  under  such  interpretation  was  also  attacked.  The 
courts  decided  that  "capital  stock"  in  the  revenue  law 
means  not  "shares  of  stock"  either  separately  or  in  the 
aggregate,  but  all  the  property  of  the  corporation,  includ- 
ing the  franchise  as  property.  The  courts  also  sustained 
the  action  of  the  Board  in  considering  funded  debt  as  with- 
in the  meaning  of  the  term  "capital  stock."  Secondly,  they 
sustained  the  rules  adopted  by  the  Board  for  the  valuing 
of  the  "capital  stock"  thus  broadened  by  construction.  As 
expressed  by  Justice  Miller  the  Court  decided  that  "a  rule 
which  ascertains  the  value  of  all  this  by  ascertaining  the 
value  of  the  funded  debt  and  of  the  shares  of  the  capital 
stock,  as  the  basis  of  assessment,  is  probably  as  fair  as  any 
other"  and  that  the  method  of  deducting  the  value  of  the 
tangible  property  to  find  the  "excess"  is  as  good  as  any 
other,  all  modes  being  more  or  less  imperfect.  Minor 
points  settled  by  the  court  at  that  time  and  since  are 
as  follows: 

1.  The  Board  is  not  bound  to  assess  capital  stock  at 
what  its  officers  report13  but  may  value  it  upon  their  own 
knowledge  and  individual  judgment.14 

2.  Although  a  corporation's  return  for  assessment 
is  to  be  made  on  blanks  furnished  from  the  proper  office, 
the  return  must  be  made  though  the  furnishing  of  the 
blanks  has  been  neglected.15 

3.  Held  that  the  absence  of  the  company's  statement 
as  to  capital  stock  is  no  bar  to  the  action  of  the  Board.15 

4.  Held  that  the  validity  of  the  assessment  is  not 
affected  by  the  fact  that  the  Board  did  not  give  notice  to  the 
corporation  to   appear.     Board  not  required  by  law  to 
do  that. 

"Republic  Life  Ins.   Co.  vs.   Pollak,   75   111.   292   (1874);   reaffirmed 
in  1876,  1878,  1887,  1890. 

14Quincy  Railroad  Bridge  Co.  vs.  County  of  Adams,  88  111.  615  (1878). 
"Pacific  Hotel  Co.  vs.  Lieb,  83  111.  602   (1876) 


53]         COLLECTION  OP  CORPORATION  TAXES          53 

5.  Held  that  the  fact  that  shares  are  worthless  does 
not  impeach  the  assessment ;  the  creditors,  that  is  the  bond 
holders,  take  the  place  of  the  stockholders.15    Even  if  the 
corporation  is  in  the  hands  of  a  receiver  its  capital  stock 
and  bonds  are  taxable.16 

6.  Held  that  assessments  by  the  Capital  Stock  Com- 
mittee of  the  Board  are  valid  acts  of  the  Board. 

7.  Its  assessment  can  be  impeached  for  fraud  only.17 
Thus  it  appears  that  the  constitutionality  of  the  "cor- 
porate excess"  method  has  been  sustained  in  every  par- 
ticular by  the  courts,  and  the  work  of  the  Board  of  Equal- 
ization has  been  kept  remarkably  free  from  legal  obstruc- 
tions. In  fact  the  Board  has  been  strikingly  well  sustained. 


"Pacific  Hotel  Co.  vs.  Lieb,  83  111.  602  (1876). 
"People  vs.  Ward,  105  111.  620  (1883). 
"Pacific  Hotel  Co.  vs.  Lieb,  83  111.  602  (1876). 


CHAPTER  IV. 

MFPHODS  OF  ASSESSMENT  OP  CORPORATIONS  EXEMPT  FROM 

"CORPORATE  EXCESS"  METHOD 
Part  1.     Foreign  Corporations,  in  General. 

There  are  certain  classes  of  corporations  that  do  busi- 
ness in  Illinois  which  are  exempt  from  the  "corporate 
excess"  methods  of  assessment.  First  to  be  considered  are 
foreign  corporations,  in  general.  They  are  not  amenable 
to  this  method  because  the  revenue  law  includes  within 
its  provisions  only  those  corporations  "created  by  or  organ- 
ized under  the  laws  of  this  State."  And,  as  already  noted, 
the  Supreme  Court  in  1875  for  this  reason  enjoined  the 
collection  of  the  taxes  on  the  "corporate  excess"  of  a  for- 
eign telegraph  company. 

But  Illinois  corporations  which  are  owned  or  con- 
trolled by  foreign  corporations  are  still  amenable  to  the 
law  as  long  as  they  keep  their  Illinois  franchise ;  although 
such  a  company  might  be  exempt  under  special  provisions 
of  the  law  as  other  corporations  of  its  special  class  are, 
as,  for  example,  printing  companies.  In  1890  the  Appel- 
late Court  held  that  it  was  the  duty  of  a  foreign  telegraph 
company  operating  under  lease  the  telegraph  line  of  a  do- 
mestic corporation  to  return  to  the  Auditor  the  schedule 
or  statement  required  by  the  revenue  law  of  1872.  This 
was  in  strict  construction  of  section  53  which  provides 
that  "any  person,  company  or  corporation,  using  or  oper- 
ating a  telegraph  line  in  this  State,  shall,  annually,  in  the 
month  of  May  return  to  the  Auditor  of  Public  Accounts  a 
schedule  or  statement",  as  set  forth  in  Chapter  II.  But 
the  tax  is  paid  not  on  the  capital  stock  of  the  foreign  hold- 
ing or  leasing  corporation.  It  is  paid  on  the  capital  stock 
of  the  leased  or  owned  Illinois  corporation. 

The  tangible  property  of  foreign  corporations  is  taxed 

54 


55]  OTHER   METHODS  OF  ASSESSMENT  55 

the  same  way  that  the  property  of  like  domestic  corpor- 
ations is  taxed,  (with  the  exception  of  insurance  com- 
panies, the  treatment  of  which  is  left  for  chapter  five.) 

Fees  and  license  taxes  of  foreign  companies  necessa- 
rily differ  somewhat  from  those  levied  on  domestic  corpora- 
tions. Legally  the  franchise  tax  "to  be  or  become",  as 
Professor  Seligman  calls  the  incorporation  fee,  cannot  be 
levied  except  by  the  State  which  creates  the  corporation. 
But  the  same  thing  is  achieved  in  Illinois  by  a  general  law 
that  requires  each  foreign  corporation  except  banting,  in- 
surance and  homestead  loan  associations,1  to  pay  such  a 
proportion  of  the  incorporation  fees  charged  to  like  Illinois 
corporations  as  its  capital  to  be  used  in  Illinois  is  a  propor- 
tion of  its  total  capital. 

But  the  most  valuable  franchise  of  the  foreign  corpora- 
tion, namely,  "to  do  or  act",  that  is,  to  extend  its  business, 
its  organization,  its  credit  and  so  forth,  is  not  taxable 
under  the  present  Illinois  laws. 

Part  2.    Banking  Corporations. 

All  banking  corporations  in  Illinois  are  exempt  from 
the  "corporate  excess"  method  of  assessment.  This  ex- 
emption has  applied  to  national  banks  and  to  State  banks 
organized  under  the  general  banking  laws,  since  1872. 
But  only  since  1893  have  banks  organized  under  special 
laws  been  exempt  from  assessment  by  the  Board  of  Equal- 
ization. 

National  banks  are  exempt  from  all  state  and  local 
taxes  upon  the  capital  stock  in  the  aggregate,  by  law  of 
Congress.2  This  was  done  to  encourage  the  investment  of 
capital  in  United  States  bonds,  the  law  being  a  measure 
passed  in  war  time.  It  has  not  been  construed  as  forbid- 
ding the  taxation  of  bank  shares  to  the  stockholder.  The 
Supreme  Court  of  the  United  States  in  1865  held  that  "a 

1  Special  laws  apply  to  insurance  and  homestead  loan  companies;  see 
Chapter  V. 

2Act  of  Congress  1864,  4ist  section. 


56  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [56 

tax  on  the  shares  of  stock  is  not  a  tax  on  the  bank",  that 
is,  on  its  capital  stock,  which  was  the  point  at  issue.3 

The  act  of  Congress  in  1864  made  it  necessary  for  the 
legislature  of  Illinois  to  revise  the  bank  taxes  of  the  State. 
It  is  of  interest  to  note  that  in  1857  Illinois  had  taken 
a  decisive  step  in  the  taxing  of  corporations  directly  upon 
their  capital  stock  by  passing  a  law  taxing  banks  and  bank- 
ing corporations  in  that  way.  This  law  was  repealed,  how- 
ever, by  an  act  of  the  legislature  in  special  session  in  June, 
1867.  Seeking  to  prevent  the  escape  of  the  capital  stock 
shares  from  taxation,  the  legislature  provided  for  a  collec- 
tion of  taxes  on  the  shares  "at  the  source" — "the  stockhold- 
ers in  such  banks  and  banking  associations  shall  be  assessed 
and  taxed  on  the  value  of  their  shares  of  stock  therein  in  the 
county,  town  or  district  where  such  banks  or  banking 
association  is  located,  and  not  elsewhere,  whether  such 
stockholders  reside  in  such  town,  county  or  district,  or 
not."  Provision  was  made  that  the  value  of  the  capital 
invested  in  real  estate,  wrhich  was  taxable  as  real  estate, 
should  be  deducted  from  the  aggregate  value  of  the  capital 
stock  before  the  value  of  each  share  was  assessed  to  the 
stockholders.  Each  bank  was  required  to  keep  in  its  office, 
subject  to  inspection  of  the  tax  officers,  at  all  times,  a  full 
and  correct  list  of  the  names  of,  and  residences  of,  and 
number  of  shares  held  by,  its  several  stockholders.  Fur- 
ther, each  bank  was  required  to  retain  so  much  of  the 
dividends  belonging  to  the  stockholders  as  would  be  neces- 
sary to  pay  the  general  property  taxes  levied  on  the  shares 
of  stock,  until  it  should  be  made  to  appear  that  the  taxes 
were  paid,  the  tax  collector  even  having  authority  to  sell 
the  shares  of  those  who  refused  to  pay  the  tax. 

This  law  was  attacked  in  1870  by  a  Mr.  Dows  of  New 
York  City,  who  carried  a  case  to  the  United  States  Su- 
preme Court  asking  that  the  collection  of  the  taxes  on  a 
State  bank  in  Chicago  be  enjoined  on  the  ground  that  the 

8U.  S.  Supreme  Court,  Van  Allen  vs.  The  Assessors,  3  Wallace  383 
(1865). 


57]  OTHER   METHODS   OP   ASSESSMENT  57 

tax  was  illegal  in  that  the  situs  of  his  shares  of  stock 
was  at  his  New  York  residence.  But  the  petition  was  de- 
nied. In  1871  and  1872  the  United  States  Circuit  Court 
did  enjoin  the  collection  of  taxes  on  national  bank  shares, 
but  the  United  States  Supreme  Court  in  1874  dissolved 
the  injunction  and  affirmed  the  validity  of  the  law.4  The 
case  came  up  under  the  provisions  of  the  revenue  law  of 
1872,  which,  however,  were,  for  national  and  state  banks, 
the  same  essentially  as  those  of  the  law  of  1867.  At  one 
or  two  points  the  law  was  changed.  No  deduction  was 
allowed  for  the  value  of  capital  invested  in  real  estate,  in 
determining  the  value  of  shares  of  stock  in  state  banks. 
(National  banks  by  law  can  hold  no  such  investments.). 
But  in  1903  such  provision  for  deduction  was  restored  to 
the  revenue  law.5  Further,  the  law  of  1872,  section  35, 
provides  that  the  shares  of  stock  of  national  banks  in  other 
states  held  by  stockholders  in  this  state  shall  not  be  re- 
quired to  be  listed  under  the  provisions  of  this  act.  They 
would  otherwise  be  listed  under  the  provision  for  sched- 
uling personal  property. 

As  to  tangible  property,  the  revenue  law  of  1872 
exempts  national  banks  from  the  rules  laid  down  in  section 
30  for  the  listing  of  the  property  and  business  of  banks; 
but  section  13  provides  that  in  all  cases  where  assessment 
is  not  specifically  provided  for,  the  personal  property 
shall  be  assessed  where  the  business  is  carried  on. 

The  law  of  1867  operated  upon  state  banking  cor- 
porations the  same  as  upon  national  banks.  The  capital 
stock  tax  for  the  year  1867  was,  by  an  emergency  clause  in 
the  act,  made  void  and  the  provision  for  taxing  shares  of 
stock  to  the  stockholders  put  into  immediate  effect.  How 
well  this  change  worked  may  not  be  proved  but  may  be 
strongly  suggested  by  one  or  two  statements.  First,  one 
of  the  first  acts  of  the  Board  of  Equalization  in  1867  was 
to  investigate  the  assessment  of  bank  stock.  The  Com- 

4Merchants  Nat'l  Bank  vs.  Tappan,  19  Wallace  501  (1874). 
5Laws,  1903,  p.  294. 


58  TAXATION  OF  CORPORATION'S   IX  ILLINOIS  [58 

niittee  on  Personal  Property  reported  that  such  shares 
of  stock  were  assessed  all  the  way  from  full  value  down  to 
one-sixth  of  full  value;  further  that  out  of  a  total  of 
$11,500,000  of  such  capital  in  the  State  only  $2,000,000 
was  assessed  to  the  stockholders.  Second,  two  years 
later  in  the  Constitutional  Convention  it  was  proposed  to 
put  a  clause  in  the  constitution  commanding  the  legislature 
to  tax  "the  actual  paid  up  capital  of  any  banking  associa- 
tion in  the  same  manner  as  other  property",  that  is,  to 
return  to  the  law  of  1857.  In  the  debate,  Mr.  Forman  said : 

I  imagine  it  is  well  known  to  every  gentleman  upon  the  floor  that 
nearly  all  the  banking  capital  of  the  State  is  now  exempt  from  taxation. 
I  am  inclined  to  think  the  only  way  to  subject  it  to  taxation  is  by  placing 
some  such  section  as  this  in  the  constitution.8 

But  the  clause  did  not  go  in.  It  was  left  to  the  discre- 
tion of  the  general  assembly.  And  in  1872  when  the  gen- 
eral revenue  law  was  enacted  state  banks,  organized  under 
the  general  banking  laws,  were  not  made  amenable  to  but 
made  exempt  from  the  operation  of  the  capital  stock  tax  by 
the  "corporate  excess"  method,  and  the  law  of  1867  in  re- 
gard to  taxing  the  shares  in  the  hands  of  stockholders  was 
retained  as  section  35  of  the  revenue  law.  Later,  in  1893,  the 
law  was  amended  so  as  to  exempt  also  state  banks  that  were 
organized  under  special  laws.  But  by  a  mistake  in  not 
completing  the  revision,  the  law  left  such  bank  stock  not 
only  exempt  from  assessment  by  the  Board  of  Equalization 
but  by  the  local  assessors  as  well.  This  was  pointed  out 
by  the  State  Auditor  in  1895  in  a  lengthy  report  to  the 
general  assembly.  Briefly  the  case  may  be  stated  as  fol- 
lows. Section  35  as  shown  above,  provides  that  national 
bank  shares  of  stock  and  the  stock  of  banks  organized 
under  "the  banking  laws  of  this  State",  shall  be  taxed  to 
the  stockholders.  But  the  stock  of  banks  enjoying  special 
charters  could  not  be  brought  under  that  section  because 
of  a  certain  clause  in  section  3  of  the  same  law.  In  that 
section,  the  law,  up  to  1905,  provided  as  follows: 

^Debates  and  Proceedings  of  Constitutional  Convention,  p.  1685. 


59]  OTHER   METHODS   OF   ASSESSMENT  59 

Provided,  that  in  all  cases  where  the  tangible  property  or  capital 
stock  of  any  company  or  association  is  assessed  under  this  act,  the  shares 
of  stock  of  any  such  company  or  association  shall  not  be  assessed  or  taxed 
in  this  state.7  This  clause  shall  not  apply  to  the  capital  stock  or  shares  of 
capital  stock  of  banks  organized  under  the  general  banking  laws  of  this 
state. 

Commenting  upon  this  the  Auditor  said :  "It  will  be 
observed  that  the  clause  first  above  quoted  exempts  the 
shares  of  stock  of  banks  organized  under  special  charter 
from  assessment  and  taxation."  If  the  case  had  been  tried 
out  in  the  courts  no  doubt  such  stock  would  have  been 
found  to  be  assessable  by  the  local  assessor,  for  the  courts 
have  always  held  to  a  very  rigid  construction  of  the  ex- 
emption clauses  in  the  revenue  article  of  the  constitution. 
And  no  semblance  of  an  exemption  of  property  of  such  a 
sort  is  provided  for  in  the  constitution.  However,  the 
legislature  in  1905  remedied  the  defect  by  including  banks 
organized  under  special  laws  within  the  provision  of  the 
last  clause,  or  sentence,  of  the  revenue  law  quoted  above, 

Of  course  strictly  according  to  the  definition  of  cor- 
poration taxes,  the  tax  on  bank  shares  is  not  a  corporation 
tax,  but  is  a  tax  rather  upon  the  property  of  the  owners  of 
the  stock.  But  if  the  Illinois  method  of  "collection  at  the 
source"  is  properly  enforced  it  amounts  to  the  same  thing. 
It  was  evidently  so  intended,  else  why  the  exception  of  bank 
corporations  alone  in  1872,  from  the  assessment  by  the 
Board  of  Equalization.  One  possible  reason  for  such  ex- 
ception is  not  that  the  capital  stock  should  not  be  taxed 
to  the  banking  corporation,  but  simply  that  both  state  and 
national  banking  corporations  should  be  taxed  by  the  same 
method. 

In  regard  to  the  tangible  property  taxes  of  state  banks 
little  space  is  accorded  in  this  study,  as  it  is  a  subject  for 
treatment  under  the  general  property  tax  rather  than  under 
corporation  taxes.  The  revenue  law  provides  as  follows: 

Sec.  30.     Every  bank  (other  than  a  national  bank), 

7This  clause,  no  doubt,  was  intended  for  the  shares  of  such  corpora- 
tions only  as  were  assessed  by  the  Board  of  Equalization;  for  it  is  a 
proviso  to  the  section  that  gives  such  power  to  the  Board. 


60  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [60 

banker,  broker  or  stockjobber,  shall  at  the  time  fixed  by 
this  act  for  listing  personal  property,  make  out  and  furnish 
the  assessor  a  sworn  statement  showing: 

First — The  amount  of  money  on  hand  or  in  transit.8 

Second — The  amount  of  funds  in  the  hands  of  other  banks,  bankers, 
brokers  or  others,  subject  to  draft. 

Third — The  amount  of  checks  or  other  cash  items,  the  amount  thereof 
not  being  included  in  either  of  the  preceding  items. 

Fourth — The  amount  of  bills  receivable,  discounted  or  purchased, 
and  other  credits  due  or  to  become  due,  including  accounts  receivable,  and 
interest  accrued  but  not  due,  and  interest  due  and  unpaid. 

Fifth — The  amount  of  bonds  and  stocks  of  every  kind  and  shares 
of  capital  stock  of  jointstock  or  other  companies  or  corporations,  held  as 
investment  or  any  other  representing  assets. 

Sixth — All  other  property  appertaining  to  said  business,  other  than 
real  estate  (which  real  estate  shall  be  listed  and  assessed  as  other  real 
estate  is  listed  and  assessed  under  this  act). 

Seventh — The  amount  of  all  deposits  made  with  them  by  other 
parties. 

Eighth — The  amount  of  all  accounts  payable,  other  than  current 
deposit  accounts. 

Ninth — The  amount  of  bonds  or  other  securities  exempt  by  law 
from  taxation,  specifying  the  amount  and  kind  of  each,  the  same  being 
included  in  the  preceding  fifth  item. 

Thus  it  would  appear  that  banking  corporations  are 
not  necessarily  favored  by  their  exemption  from  the 
assessment  by  the  Board  of  Equalization;  for  the  corpor- 
ation which  is  assessed  by  the  Board  is  assessed  upon  such 
part  of  its  capital  stock  value  only  as  is  not  covered  by 
the  assessed  value  of  the  tangible  property,  but  the  banking 
capital  is  taxed  in  the  form  of  money  and  credits  and  in 
addition  the  dividends  are  levied  upon  to  pay  the  share- 
holder's tax  on  the  shares  if  any  do  not  pay  up. 

In  the  actual  assessment  of  bank  shares  the  same  lax- 
ness  prevailed  for  a  long  time  as  exists  in  the  local  assess- 
ment of  all  other  personal  property.  The  Illinois  Bureau  of 
Labor  Statistics  in  1894  in  its  study  on  taxation,  page  32, 
gives  a  list  of  the  valuations  of  bank  shares  which  are 

8Down  to  1894  greenbacks  were  held  to  be  untaxable ;  Congress  in 
that  year  made  them  taxable. 


61]  OTHER  METHODS  OF  ASSESSMENT  61 

listed  in  55  counties  in  1893.  (45  counties  reported  no 
such  property.)  Cook  county  with  a  population  of 
1,191,922  reported  state  and  national  bank  shares  to  the 
amount  of  $357,353;  while  the  other  54  counties  with  a 
population  of  1,643,298  reported  $3,347,411.  Cook  county 
reported  $.30  to  a  person;  the  other  counties  reported 
$2.03  to  the  person  of  national  and  state  banking  stock 
shares.  Further,  it  is  shown  as  computed  from  commercial 
statements,9  that  the  values  of  Cook  County  bank  stock 
of  the  kind  mentioned  was  not  $357,353  but  was  $56,394,- 
350.  Conceding  that  bank  stock  is  entitled  to  the  same 
undervaluation  as  other  personalty  was  enjoying  at  the 
time  or  about  80  per  cent,  (the  Bureau  of  Labor  Statistics 
makes  no  such  concession  but  in  fairness  it  must  be  made) 
— conceding  this,  the  capital  stock  shares  of  Cook  county 
for  1894  should  have  been  at  least  $11,278,870,  which  is 
$10,121,517  more  than  what  was  actually  reported.  Again, 
the  Bureau  gives  a  table  for  eighteen  state  and  eighteen 
national  banks  of  Cook  county  whose  assessment  in  1893 
after  being  equalized  by  the  Board  of  Equalization  amount- 
ed to  only  $7,744,903;  while  the  commercial  value  was 
$59,732,600.  An  80  per  cent,  deduction  from  that  leaves 
$10,946,540,  or  an  undervaluation  of  $3,201,437  on  the 
property  of  the  thirty-six  banks. 

A  Report  on  the  Taxation  and  Revenue  System  of 
Illinois  prepared  for  the  Special  Tax  Commission  of  1910, 
shows  the  recent  results  of  the  assessment  of  bank  shares 
to  be  somewhat  different  from  that  shown  by  the  report  of 
the  Bureau  of  Labor  Statistics  in  1894.  This  report  states : 

In  comparison  with  the  assessments  of  other  bonds  and  stocks,  the 
assessment  of  shares  of  stock  in  the  State  and  national  banks  appears  to 
be  relatively  high,  and  shows  a  noticeable  increase  during  the  past  ten 
years.  Special  provisions  of  the  law  apply  to  the  assessments  of  banks. 
Before  1901,  all  State  and  private  banks  were  required  to  submit  detailed 
statements  of  their  moneys,  bills  receivable,  deposits,  etc.,  while  the  shares 
of  national  banks  were  assessable  under  the  general  provisions  of  the 
revenue  law.  Under  legislation  of  1901  and  1903,  however,  shares  of 
incorporated  State  and  national  banks  are  now  assessed  where  the  bank 

9Of  March  5,  1895. 


62  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [62 

is  located,  and  collected  by  the  banks  from  dividends  due  the  stockholders. 
The  value  of  the  shares  is  determined  by  deducting  from  the  value  of  all 
the  shares  of  capital  stock  the  assessed  value  of  real  estate  owned  by  the 
bank  in  the  county  where  the  bank  is  located. 

The  assessment  of  bank  shares  shows  a  marked  decline  from  1873 
to  1898;  and  a  notable  increase  in  1899  at  the  time  the  rule  for  one-fifth 
valuations  went  into  effect.  In  1901  under  the  new  law  for  the  assess- 
ment of  shares  of  state  banks,  the  assessed  valuation  increased  about  five 
times  that  for  1900;  but  in  1902  this  dropped  to  about  the  figures  for  1900. 
Since  then  there  has  been  a  considerable  increase,10  and  with  the  change 
to  the  rule  of  one-third  valuations,  in  1909,  another  marked  increase  to 
$44,216,278. 

Complaints  have  been  made  to  the  Special  Tax  Commission,  that  bank 
shares  are  assessed  higher  in  proportion  to  their  value  than  real  estate  or 
other  property.  On  the  other  hand,  the  Illinois  Tax  Reform  Association 
has  claimed  that  the  assessment  of  bank  shares  in  Cook  County  is  inequita- 
ble, and  discriminates  in  favor  of  certain  banks.11 

Part  3.    Business  Corporations  Exempt  by  Special 
Provisions 

Besides  all  foreign  corporations  and  all  banking  cor- 
porations of  the  State,  there  are  several  other  classes  of 
corporations  which  are  exempt  from  the  "corporate 
excess"  method  of  assessment.  These  are  "companies  or 
associations  organized  for  purely  manufacturing  and  mer- 
cantile purposes,  or  for  either  of  such  purposes,  or  for 
printing,  or  for  the  publishing  of  newspapers,  or  for  the 
mining  and  sale  of  coal,  or  the  improving  and  breeding 
of  stock",12  and  homestead  loan  associations.13  Such  ex- 
emption has  been  for  the  encouragement  of  capitalistic 
development  of  the  resources  of  the  State.  The  financial 
history  of  many  other  states  would  show  that  this  idea  of 
lessening  the  tax  burden  to  invite  capital,  is  a  common 
idea.  From  the  following  summary  it  may  be  seen  that 

10In  1908,  Bank  Shares  in  Cook  County  were  assessed  at  $16,099,200, 
and  for  the  entire  state  at  $22,698,445. 

"John  A.  Fairlie,  A  Report  on  the  Taxation  and  Revenue  System  of 
Illinois,  1910,  pp.  50-51. 

12Exempt  by  law  of  1872,  as  amended  in  1879,  1893,  1905. 

13Exempt  by  law  of  1879  as  amended  in  1887,  1891,  1895. 


03]  OTHER    METHODS   OF  ASSESSMENT  63 

many  states  go  further  than  Illinois  by  exempting  certain 
corporations  from  any  general  taxes  whatever.14 

Alabama.  Cotton  and  woolen  manufactures,  five  years.  Laws  1893,  chap. 
383.  Manufacturers  with  $50,000  invested,  ten  years.  Laws  1897, 
chap  378. 

Arizona.  $300,000  beet-sugar  plant,  nine  years.  Revised  statutes,  1901,  sec- 
tions 4062-4067.  Canaigre  manufacturers,  ten  years.  Laws  of  1895, 
chap.  77.  Irrigating  canals  and  reservoirs,  fifteen  years.  Laws  1899, 
chap.  15.  Railroads,  ten  years.  Laws  1899,  chap.  68.  Water  storage 
for  generating  electricity,  nine  years.  Laws  1903,  chap.  27. 

California.  Fruit  and  nut  trees,  and  grape  vines,  four  and  three  years 
respectively.  Constitution,  article  XIII,  sec.  12^4,  amendment  adopted 
Nov.  6,  1894. 

Idaho.  Mining  claims  not  patented,  irrigating  ditches,  and  water  rights 
if  water  is  not  sold  or  rented,  no  time  limit.  Laws  1903,  page  73. 

Louisiana.  (Exemption  from  parochial  and  municipal  taxation)  Capital, 
machinery,  and  property  employed  in  mining  and  the  following  enter- 
prises: textile  fabrics,  yarns,  rope,  cordage,  leather,  shoes,  harness, 
saddlery,  hats,  clothing,  flour,  machinery,  articles  of  tin,  copper  and 
sheet  iron,  agricultural  implements,  furniture  and  other  articles  of 
wood,  marble  or  stone,  soap,  stationeries,  ink  and  paper,  boatbuilding, 
fertilizers  and  chemicals,  providing  five  hands  or  more  are  employed 
in  each  factory,  ten  years  from  January  i,  1900.  Constitution  of  1898, 
section  230. 

Exemption  from  all  taxation:  railroads  begun  after  May -12,  1898, 
and  completed  before  January  i,  1904,  (if  not  aided  by  local  divisions), 
ten  years  from  completion.  Idem. 

Mississippi.     Manufacturing  enterprises,  ten  years.     Laws  1896,  chap.  64. 

New  Mexico.  Manufacturing  enterprises,  six  years.  Laws,  1897,  chap, 
twenty-four.  Tanning  factories,  six  years.  Laws,  1899,  chap.  15. 

New  Hampshire.  Manufacturing  enterprises  may  be  exempted  by  vote 
of  town,  for  ten  years.  Statutes,  1901,  page  204. 

Oklahoma.    Cotton  manufacturers,  ten  years.    Laws,  1899,  chap.  18. 

Rhode  Island.     Same  as  New  Hampshire.    Laws,  1899,  chap.  18. 

South  Carolina.  By  vote  of  city  or  town  manufacturing  enterprises, 
mines  and  quarries  may  be  exempted  for  five  years  from  all  but 
school  taxes.  Constitution  of  1895,  article  VIII,  sec.  8. 

Utah.  Portland  cement  manufacturers,  five  years.  Laws,  1890,  chap, 
eighteen. 

Vermont.  Manufacturing  enterprises,  mines  and  quarries  may  be  ex- 
empted for  ten  years  by  vote  of  town.  Laws,  1898,  chap.  14. 

14From  "Encouragement  to  Industry  by  Exemption  from  Taxation" 
by  John  Burton  Phillips,  in  the  Quar.  Jour.  Econ.,  Nov.-Dec.,  1904. 


64  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [64 

Wisconsin.    Zinc  manufacturers  three  years. 

Wyoming.    Beet-sugar  factories,  ten  years.    Revised  statutes,  1899,  section 
1762. 

Even  if  the  legislature  thought  it  advisable  to  exempt 
any  such  Illinois  corporations  from  all  taxes  on  their 
general  property,  as  it  has  indeed  in  times  past  exempted 
them  from  taxes  on  their  capital  stock,  it  would  be  illegal 
to  do  so  under  our  present  constitution.  It  was  proposed 
in  the  constitutional  convention  of  1870,"  that  for  the  pur- 
pose of  encouraging  manufacturers  in  this  State,  there 
ought  to  be  a  clause  in  the  constitution  exempting  all 
manufacturing  companies  from  taxation  by  all  laws  of  this 
State,  for  the  term  of  five  years  after  the  adoption  of  the 
constitution  by  the  people."15  On  the  other  hand  there 
was  a  proposal  to  put  a  clause  in  the  constitution  prohib- 
iting the  legislature  from  exempting  any  corporation  from 
taxation.16  Neither  proposal  actually  found  its  way  into 
the  constitution,  although  the  latter  practically  did  so. 
The  constitution  on  exemptions  is  as  follows : 

Article  IX,  section  3.  The  property  of  the  State,  counties,  and  other 
municipal  corporations,  both  real  and  personal,  and  such  other  property 
as  may  be  used  exclusively  for  agricultural  and  horticultural  societies,  for 
school,  religious,  cemetery  and  charitable  purposes,  may  be  exempted  from 
taxation ;  but  such  exemptions  shall  be  only  by  general  law.  .  .  . 

It  may  be  of  interest  to  follow  the  historical  develop- 
ment of  the  exemption  of  capital  stock  of  certain  corpora- 
tions from  the  "corporate  excess"  method  of  assessment  by 
the  Board  of  Equalization.  The  first  general  assembly  at 
its  regular  session  in  1871  investigated  the  matter  of  taxing 
manufacturers.  Fifteen  hundred  circular  letters  were 
sent  out  to  the  manufacturers  asking  each  to  state  the 
amount  of  his  or  its  capital  stock,  and  output  of  goods; 
further,  to  state  how  the  personal  property  tax  bore  on 
his  business  as  compared  with  other  branches  of  trade; 


^Debates  and  Proceedings  of  Constitutional  Convention,  p.  199,  Jan. 
5,  1870. 

,  p.  221,  Jan.  19,  1870. 


65]  OTHER   METHODS   OF   ASSESSMENT  65 

and  to  state  what  changes  he  would  suggest  in  the  mode  of 
assessment.  Only  one  hundred  and  thirty-four  replies, 
or  about  one  out  of  eight,  were  received.  Capital  to  the 
amount  of  $14,000,000,  and  output  of  goods  to  the  amount 
of  $23,000,000  were  reported.  Many  refused  to  reply  be- 
cause they  did  not  wish  to  make  known  their  capital  stock. 
The  Committee,  however,  recommended ...  "...  Of  this 
great  interest,  yet  in  its  infancy, ...  it  becomes  us  as  rep- 
resentatives ...  to  see  to  it  that  no  laws  are  passed  which 
shall  be  oppressive . . .  and  that  every  encouragement  be 
given  to  manufacturers,  so  that  capital  may  flow  into  the 
State."  But  nothing  came  of  this  recommendation.  On 
the  contrary,  at  its  special  session  in  1872  this  same 
assembly  enacted  the  revenue  law  providing  for  the  "cor- 
porate excess"  system  and  did  not  exempt  manufacturing 
companies  from  assessment  thereunder. 

In  1875  the  legislature  amended  the  law  relative  to 
the  assessment  of  corporations  by  the  Board  of  Equaliza- 
tion so  that 

In  assessing  companies  and  associations  organized  for  purely  manu- 
facturing purposes,  or  for  printing,  or  for  publishing  of  newspapers,  or 
for  the  improving  and  breeding  of  stock,  the  assessment  shall  be  so  made 
that  such  companies  and  associations  so  organized  shall  only  be  assessed 
as  individuals  under  like  circumstances  would  be  assessed,  and  no  more ; 
and  such  companies  shall  be  allowed  the  same  deductions  as  are  allowed 
to  individuals. 

Dispute  at  once  arose  in  the  Board  of  Equalization  as 
to  whether  the  amendment  was  intended  to  exempt  such 
companies  from  their  jurisdiction.  A  motion  to  that  effect 
was  indefinitely  postponed,  and  later  at  the  end  of  the 
session  a  motion  to  strike  all  such  companies  from  the 
report  of  the  Capital  Stock  Committee  was  lost.  Seventy- 
four  companies,  the  names  of  which  would  indicate  that 
they  were  organized  for  the  purposes  mentioned  in  the 
amendment,  were  listed  in  the  report.  Some  of  them 
were  assessed  and  some  were  not  even  valued.  In  1876 
the  Board's  report  shows  again  the  same  evident  difference 
as  to  the  interpretation  of  the  amendment.  In  1879  the 


66  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [66 

legislature  revised  the  wording  of  the  amendment  so  as  to 
put  the  assessment  of  those  corporations  organized  for  the 
above  named  purposes  distinctly  in  the  hands  of  the  local 
assessors.17  The  Attorney  General  being  asked  by  the 
Board  to  give  his  opinion,  interpreted  the  law  to  mean  that 
since  certain  banks  had  in  1872  been  exempted  from  the 
jurisdiction  of  the  Board,  so  now  these  classes  of  cor- 
porations were  properly  exempted.  There  could  be  no 
question  as  to  validity  of  the  law.18  The  local  assessoTs 
would,  he  argued,  be  required  to  assess  the  capital  stock 
as  well  as  the  other  personal  property  and  the  real  estate.19 
A  majority  of  the  Capital  Stock  Committee  in  an  elaborate 
argument  attempted  to  show  that  the  Attorney  General  was 
mistaken  in  his  construction  of  the  law,  especially  in  re- 
gard to  the  local  assessor's  power  of  assessing  the  capital 
stock  of  a  corporation.  He  might  assess  the  shares  of  stock 
held  by  the  stockholders,  but  not  the  capital  stock  of  the 
corporation,  for  no  provision  was  made  in  the  revenue  law 
for  anyone  to  assess  capital  stock  in  the  aggregate,  except 
the  Board  of  Equalization.  But  the  Board  for  once  over- 
ruled its  Capital  Stock  Committee  and  voted  not  to  assess 
such  corporations. 

In  1893  companies  organized  for  the  purpose  of  mining 
and  selling  coal  were  included  in  this  exemption  from 
assessment  by  the  Board  of  Equalization  by  another 
amendment  to  the  revenue  law  of  1872.  In  1903  a 
committee  from  the  Illinois  Manufacturers'  Associ- 
ation appeared  before  the  Board  with  the  plea  that 
mercantile  corporations  not  being  exempt  from 
assessment  on  capital  stock  by  the  Board,  were  greatly 
handicapped;  further  that  simply  because  mercantile 
corporations  were  unknown  in  1879,  was  the  only 


"Laws  of  Illinois,  1879,  P-  251. 

18Held  valid  later  by  Sup.  Ct.,  Coal  Run  Co.  vs.  Patrick  Finlen,  124 
111.,  66  (1888),  and  in  other  cases. 

"Attorney  General  Jas.  K.  Edsall,  letter,  in  Proceedings  of  State 
Board  of  Equalization,  1879,  p.  6. 


67]  OTHER    METHODS   OF   ASSESSMENT  67 

reason  why  at  that  time  such  corporations  had  not 
been  included  in  the  amendment  to  the  law;  further  that 
there  is  a  fundamental  difference  between  public  service 
corporations  and  mercantile  corporations;20  further  that 
to  tax  mercantile  corporations  on  capital  stock  and  not  to 
tax  the  capital  of  unincorporated  mercantile  houses  and 
foreign  corporations  doing  such  business,  was  an  unjust 
discrimination  and  would  retard  the  commercial  growth 
of  the  State.  Of  course  the  Board  could  give  no  relief.  But 
in  1905  the  legislature  granted  them  the  supposed  relief 
by  again  amending  the  revenue  law  of  1872.21  The  law 
went  even  further  than  to  amend  sections  3,  32,  and  108 
so  as  to  exclude  the  capital  stock  of  corporations  organ- 
ized "for  purely  manufacturing  or  mercantile  purposes, 
etc.",  from  the  assessment  of  capital  by  the  Board  of 
Equalization,  and  also  amended  section  1  of  the  revenue 
law  so  as  to  expressly  exempt  such  capital  stock  from  any 
assessment  whatever.  The  act  became  law  without  the 
signature  of  the  Governor.  This  latest  phase  of  tax  ex- 
emption of  capital  stock  has  recently  been  passed  upon 
by  the  Supreme  Court.  A  coal  mining  company  in  1907 
was  assessed  on  its  capital  stock  by  a  local  assessor.  It 
resisted  collection  of  the  tax  as  being  illegal  under  the 
terms  of  section  1  of  the  revenue  law  amended  as  above  indi- 
cated. But  the  Supreme  Court  held  that  the  constitution 
gives  the  legislature  no  power  to  exempt  property  of  that 
kind.22  It  has  repeatedly  held  that  it  is  constitutional 
for  the  legislature  to  provide  (1)  that  the  Board  of  Equal- 
ization shall  assess  the  capital  stock  of  certain  classes  of 
corporations,  and  (2)  that  it  shall  not  assess  the  capital 
stock  of  certain  other  classes  of  corporations.  And  now 
this  latest  decision  puts  the  assessment  of  the  capital  stock 
in  the  hands  of  the  local  assessor.  It  is  his  duty  to  assess 
the  capital  stock  and  franchise  value  of  any  corporation 

20See  Ely,  Outlines  of  Economics,  p.  647,  on  this  point. 

21Laws  of  Illinois,  1905,  p.  355. 

22Cons.  Coal  Co.,  Appellant,  vs.  Miller  et  al,  236  111.,  149   (1908). 


68  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [(58 

which  by  reason  of  the  fact  that  its  charter  makes  it  a 
"purely  manufacturing  or  mercantile,  printing,  publishing, 
coal-mining  or  stockbreeding"  concern,  is  exempt  from  the 
jurisdiction  of  the  Board  of  Equalization.  Thus  the  con- 
tention of  Attorney  General  Edsall  in  1879  finds  judicial 
recognition  in  1908.  That  from  1879  to  1908  these  corpor- 
ations, because  exempt  from  the  "corporate  excess"  method 
of  assessing  capital  stock,  had  been  considered  to  be  tax- 
able on  tangible  property  only,  is  evidenced  by  the  facts 
and  theories  which  we  have  seen  brought  before  the  Board 
by  the  agents  of  the  mercantile  associations.  Further,  the 
Auditor  of  Public  Accounts  in  1895,  commenting  upon 
this  very  point,  said : 

By  this  clause  a  large  amount  of  dividend-paying  capital  which  is 
invested  in  various  enterprises  throughout  the  State  is  freed  from  the 
burden  of  taxation,  while  the  small  holdings  of  the  toiling  masses  whose 
labor  makes  the  investment  of  such  capital  profitable  are  not  allowed  to 
escape  the  eye  of  the  asssessor.  I  would  recommend  this  clause  be 
repealed  or  greatly  modified.23 

The  legislature,  as  we  have  seen,  did  not  repeal  nor 
modify,  but  instead  added  to  the  exemption.  And  now 
though  the  latest  decision  of  the  Supreme  Court  does 
modify  it  radically,  yet  the  practical  difficulties  remain. 
They  are  those  that  were  pointed  out  by  the  Capital  Stock 
Committee  in  1879  when  they  demurred  to  the  opinion  of 
Attorney  General  Edsall.  The  legislature  has  not  provided 
the  assessor  with  power  to  get  statements  from  these  cor- 
porations relative  to  their  capital  stock,  debt  and  so  forth. 
Further,  the  local  assessor  in  order  to  determine  whether 
he  or  the  Board  of  Equalization  is  to  assess  the  capital 
stock  of  a  corporation,  must  see  the  charter  or  articles  of 
incorporation.  For  the  Supreme  Court  has  held  that  not 
the  business  which  a  corporation  can  be  seen  to  be  doing, 
but  the  "purpose  for  which  it  was  organized''  as  shown 
by  its  charter,  is  the  test  of  whether  any  given  corporation 
is  or  is  not  to  be  assessed  by  the  Board.24  A  reference  to 

"Auditor's  Report  to  Gen.  Assembly,  1895,  page  viii. 
"Distilling  &  Cattle  Feeding  Co.  vs.  People,  161  111.  101   (1896). 


69]  OTHER  METHODS  OP  ASSESSMENT  69 

the  pages  of  the  Board's  reports  will  show  that  many  com- 
panies are  assessed  whose  titles  might  suggest  that  they 
were  corporations  of  the  exempted  classes.  On  the  other 
hand  certain  corporations  which  we  would  expect  to  find 
on  the  list  are  absent,  as  for  example,  Swift  &  Co.,  Armour 
&  Co.,  and  many  others.  The  character  of  the  charter  rather 
than  the  character  of  the  business  done  by  the  corporation, 
has  been  the  deciding  test.  Common  observation  of  the 
everyday  facts  in  regard  to  the  ultra  vires  business  done 
by  corporations,  is  enough  to  convince  anyone  that  to  de- 
cide the  method  of  taxing  a  going  concern  solely  by  the 
wording  of  a  charter  which  may  be  outgrown,  which  may 
be  only  on  the  face  of  it  "purely  manufacturing  or  mer- 
cantile, etc.",  is  to  say  the  least,  a  poor  rule  to  use. 

It  is  not  possible  from  the  present  available  informa- 
tion to  make  even  an  estimate  of  the  extent  to  which,  from 
1879  to  the  present,  capital  invested  in  such  enterprises  as 
these  has  been  exempt  from  taxation  on  capital  stock. 
Not  even  the  number  of  corporations  doing  business  in  the 
State  during  a  given  year  may  be  learned  from  the  govern- 
ment archives.  In  1901  a  law  was  passed  requiring  annual 
reports  from  all  corporations,  but  it  is  not  enforced.  To 
1909  the  records  of  the  Secretary  of  State  show  that  70,000 
corporations  have  been  chartered  in  this  state.25  The  Board 
of  Equalization  in  1902,  1903,  and  1904,  published  in  their 
Proceedings  a  tabulated  list  of  all  those  corporations  which 
they  found  to  be  exempt  from  their  jurisdiction.  There 
were  1504,  1801  and  2585  respectively  in  the  three  years. 
In  1903  the  Board  also  tabulated  each  one's  authorized 
capital  stock.  The  total  for  1801  companies  is  no  less  than 
1283,006,680.  This  is  the  par  value  only.  It  is  safe  to 
assume  that  those  companies  whose  stock  was  above  par 
inore  than  offset  those  whose  stock  was  below  par.  And  the 
total  sum  of  capital  that  was  not  taxed  under  the  "corpor- 
ate excess"  method  in  that  year  no  doubt  would  be  enor- 
mously larger  if  we  might  know  what  the  capital  stock 

"Letter  from  Secretary  of  State,  April  23,  1909. 


70  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [70 

was  of  the  great  number  of  corporations  that  did  not 
report  at  all  to  the  Board.  If  only  one-fourth  of  the  cor- 
porations that  have  been  chartered  in  this  State  are  still 
doing  business,  there  must  have  been  ten  thousand  cor- 
porations in  1903  which  might  have  been  added  to  the  list  of 
1801  published  by  the  Board.  In  the  following  table  are 
some  of  the  corporations  that  appear  on  the  list. 


N.  Y.  Biscuit  Co $10,000,000 

N.  K.  Fairbanks  Co 2,000,000 

Todd  Cotton  Harvester  Co 2,000,000 

Spring  Valley  Coal  Co 2,500,000 

U.  S.  Sugar  Refining  Co 2,000,000 

Western  Electric  Co 15,000,000 

American  Biscuit  &  Mfg.  Co 10,000,000 

Chicago,  Milwaukee,  Inland  Lake  Traction  Co 50,000 

Mathews  Humane  Stock  Trans.  Co 2,000,000 

Lyon  Cypress  Lumber  Co 2,000,000 

Inland  Steel  Co 2,000,000 

Illinois  Steel  Co 5,000,000 

Gottfried  Brewing  Co 1,000,000 

Chicago  Western  Elevated  R.  R.  Co 5,000,000 


The  above  corporations  were  not  taxed  a  penny  on 
their  capital  stock.  But  laundry  companies,  livery  com- 
panies, paving  companies,  restaurant  companies,  team- 
ing companies  and  many  others,  to  the  total  number  of 
1104  were  taxed  on  their  capital  stock.  It  must  be  appar- 
ent to  the  reader  that  the  present  laws  which  exempt  cer- 
tain classes  of  corporations  from  the  "corporate  excess" 
method  of  assessment  have  produced  a  situation  of  gross 
inequality  among  corporations  of  practically  the  same 
classes.  And  it  would  appear  that  the  larger  corporations 
have  an  advantage  over  many  of  the  smaller  ones. 

A  more  defensible  case  remains  to  be  discussed.  In 
1879  the  general  assembly  enacted  a  general  act  for  the 
incorporation  of  homestead  loan  associations  on  the  co- 
operative plan.  Until  1891  these  were  assessed  by  the 
Board  of  Equalization.  But  in  1887  and  in  1891  the  law 


71]  OTHER   METHODS  OF  ASSESSMENT  71 

was  amended26  so  as  to  exempt  their  stock  from  taxation.27 
In  1891  the  Board  of  Equalization  began  to  omit  the 
assessment  of  their  capital  stock.  But  the  Supreme  Court 
in  1894  declared  the  exemption  to  be  unconstitutional28 
and  the  legislature  made  another  attempt  to  accomplish 
the  desired  end  in  1895.  Instead  of  distinctly  exempting 
homestead  loan  stock  shares,  they  revised  the  method  of 
listing  and  valuing  such  stock  in  a  way  that  practically 
leaves  the  capital  stock  exempt.  Sections  27,  28,  and  29 
of  the  revenue  law  of  1872  make  provision  for  the  listing 
of  credits;  to  these  sections  the  legislature  added  sections 
29a,  29 b,  29c,  and.29d.  The  sections  are  as  follows: 

293.  The  stockholders  of  every  mutual  building,  loan  and  home- 
stead association  for  the  purpose  of  building  homesteads  and  loaning 
money  to  the  members  thereof  only,  whether  such  association  is  organized 
under  the  laws  of  this  state  or  of  any  other  state  or  territory  of  the 
United  States,  shall  list  for  taxation  with  the  local  assessor  where  such 
stockholders  reside,  the  number  of  shares  of  stock  of  such  association 
owned  by  each  of  them  respectively  and  the  value  thereof  on  the  first 
day  of  April  in  each  year,  and  the  same  shall  be  assessed  against  such 
stockholders  and  the  taxes  thereon  collected  in  the  same  manner  as  on 
other  personal  property. 

2gb.  The  shares  of  stock  of  all  stockholders  residing  without  this 
State  of  such  associations  shall  be  assessed  by  the  local  assessors  where 
such  associations  are  located,  and,  for  the  purpose  of  collecting  taxes  there- 
on, a  lien  is  hereby  created  upon  such  stock. 

2pc.  In  determining  the  value  of  such  stock  for  the  purpose  of  tax- 
ation the  value  of  the  real  estate  owned  by  such  association  shall  be  first 
deducted  from  their  assets  and  such  real  estate  shall  be  assessed  in  the 
manner  now  provided  by  law. 

2O.d.  The  shares  of  stock  and  property  of  every  such  mutual  build- 
ing, loan  and  homestead  association  shall  be  assessed  as  herein  provided 
and  not  otherwise. 

This  is  the  law  at  present.     In  1901  the  following 

26Laws  of  Illinois,  1887,  p.  131 ;  laws  of  Illinois,  1891.  p.  89. 

27"and  all  money  paid  to  such  corporation,  being  at  once  loaned  out 
and  placed  into  taxable  property,  and  the  shares  of  stock  and  notes  pro- 
vided for  in  this  act,  being  simply  evidence  as  to  where  such  money  has 
been  placed,  therefore  such  stock  and  notes  shall  not  be  subject  to 
taxation." 

28People's  Loan  &  Homestead  Ass'n  vs.  Keith,  153  111.,  609  (1894).— 
"The  notes  and  mortgages  are  credits  belonging  to  the  corporation." 


72  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [72 

proviso  was  annexed:  "Provided  that  no  stock  of  such 
association  while  loaned  upon  by  and  pledged  as  security 
to  the  association  issuing  it,  to  an  amount  equal  to  the  par 
value  of  such  stock,  shall  be  subject  to  assessment."  But 
the  Supreme  Court  held  this  was  unconstitutional.29 

In  1902  the  Board  of  Review  of  St.  Clair  County 
assessed  the  notes  and  mortgages  of  the  St.  Louis  Loan  & 
Investment  Co.  The  company  appealed  to  the  Auditor,  who 
as  required  by  section  78  of  the  revenue  law  of  1872,  certi- 
fied the  facts  to  the  Supreme  Court.  It  was  held  by  the 
Court  that  the  law  of  1895  was  valid;  and  "where  this 
method  has  been  followed  the  Board  of  Review  has  no 
power  to  also  assess  notes  and  mortgages  taken  by  the 
association  for  loans",29  because  the  real  estate  was  taxed, 
and  in  determining  the  value  of  the  capital  stock,  pursuant 
to  assessing  each  share's  value  to  the  stockholders,  only 
real  estate  was  deducted;  and  hence  loans  and  mortgages 
were  included  in  the  value  of  the  shares.  As  the  Supreme 
Court  has  construed  the  law,  it  appears  that  all  the  home- 
stead loan  corporations  pays  is  a  tax  on  its  real  estate. 
Its  other  property,  which  consists  of  capital  stock,  notes 
and  mortgages,  is  taxed  to  the  individual  shareholders, 
in  the  form  of  a  tax  upon  shares  of  capital  stock. 


29In  re  St.  Louis  Loan  &  Investment  Co.,  194  111.  609  (:oo2). 


CHAPTER  V. 

LICENSE  AND  EXAMINATION  FEES  AND  "RECIPROCAL  TAXES". 

In  addition  to  the  taxes  on  property  locally  assessed 
and  on  the  capital  stock  assessments  by  the  State  Board  of 
Equalization,  some  revenue  is  received  from  organization 
•and  examination  fees  on  corporations,  and  from  fees  and 
special  taxes  on  insurance  companies. 

Part  1.    Corporation  Fees. 

Before  1870,  such  registration  and  incorporation  fees 
as  were  collected  from  corporations  were  retained  by  the 
Secretary  of  State  or  (after  1848)  the  Auditor  of  State. 
The  Constitution  of  1870,  however,  provided  that  all  fees 
payable  to  any  of  the  executive  officers  should  be  paid  into 
the  State  treasury.  The  revenue  law  of  1872  authorized 
the  Secretary  of  State  to  make  the  following  charges : 

Granting    license $1.00 

Filing  articles  of  association,  incorporation  or  consolidation. .  $1.00 
Issuing  certificate   $1.00 

With  these  small  fees,  the  revenue  was  not  important, 
reaching  a  maximum  of  |33,587.68  for  the  period  1890-92. 

In  1893  a  general  incorporation  fee  of  $25  was  im- 
posed; and  the  revenue  from  corporation  fees  during  the 
next  biennial  period  more  than  doubled  (to  $74,054.02). 
In  his  report  for  1894,  the  Secretary  of  State  recommended 
that  the  incorporation  fee  should  vary  with  the  amount  of 
capital  stock;  and  the  general  assembly  of  1895  passed 
an  act  establishing  a  sliding  scale  of  charges,  which  is  still 
in  force. 

The  general  law  for  the  organization  of  corporations 
(except  homestead  loan  associations,  religious  associations 
or  corporations,  and  corporations  not  for  pecuniary  profit) 

73 


74  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [74 

provides  that  the  following  fees  shall  be  paid  to  the  Secre- 
tary of  State  as  incorporation  fees : 

If  capital  stock  is  $2500  or  less $25.00 

If  capital  stock  is  between  $2500  and  $5000 50.00 

For  each  additional  $1000  of  capital  stock  over  $5000 i.oo 

For  the  certificate  of  complete  incorporation i.oo 

For  an  increase  of  capital  stock,  for  each  $1000 i.oo 

Thus  for  example  the  fee  to  the  state  for  a  million  dollar 
corporation  is  fl,046.  An  increase  of  capital  stock  of 
1100,000  would  cost  another  f  101.1 

In  addition  to  the  fees  from  Illinois  corporations,  the 
law  requires  companies  organized  in  other  States  (except 
banking,  homestead  loan,  insurance,  and  railroad  and  tele- 
graph companies  whose  lines  had  been  built  in  Illinois 
previous  to  1899 )  to  pay  the  same  fees  as  if  they  had  organ- 
ized under  the  laws  of  Illinois,  upon  such  a  proportion  of 
their  capital  stock  as  is  represented  by  their  property  in 
the  state.  The  fee  is  determined  by  the  Secretary  of  State 
by  a  consideration  of  the  sworn  statement  required  of  the 
corporation  as  to  the  proportion  of  its  capital  stock  that 
is  to  be  represented  in  Illinois  by  its  property  and  business. 
For  example  if  a  New  Jersey  corporation  with  a  capital 
stock  of  a  million  dollars  aims  to  use  one-tenth  of  its  capi- 
tal in  Illinois,  it  must  pay  a  fee  equal  to  one-tenth  of  the 
f  1046  fee  above  computed  for  a  million  dollar  Illinois  cor- 
poration. In  1907-1908,  the  Secretary  of  State  collected 
$78.421.86. 

Corporations  not  for  pecuniary  profit  pay  an  organ- 
ization fee  of  $10,  and  $1  for  certificate  with  seal.  Home- 
stead loan  associations,  in  addition,  pay  a  $2  fee  for  filing 
their  annual  reports  with  the  Auditor,  also  the  expenses 
and  compensation  of  the  Auditor  or  his  deputy  for  examina- 
tion at  least  once  a  year.  Foreign  corporations  of  this  kind 
at  the  time  they  file  application  for  the  privilege  of  doing 
business  in  the  State  must  pay  $50,  and  also  $25  for  the 
certificate  of  authority  and  $25  for  its  annual  renewal. 

1Hurd's   Revised   Statutes,   1908,   p.    1076. 


75]  FEES  AND  RECIPROCAL  TAXES  75 

They  must  also  pay  to  the  Auditor  or  his  deputy,  "his  reas- 
onable compensation  and  expenses"  as  fees  for  the  exami- 
ination  of  the  business.2 

State  banks  are  required  to  pay  the  bank  examiner 
$10.00  per  day  and  25  cents  mileage,  and  also  $5.00  for 
filing  the  quarterly  report.  Savings  banks  pay  an  organ- 
ization fee  of  $5.00;  and,  if  their  funds  exceed  $100,000, 
their  proportionate  assessment  to  maintain  the  state  bank- 
ing department. 

Such  license  and  examination  fees  are  collected  auto- 
matically when  the  permits,  licenses  or  certificates  are 
issued.  The  increased  corporation  fees  imposed  in  1895 
brought  a  considerable  revenue  to  the  state;  and  at  the 
same  time  are  said  to  have  acted  to  prevent  the  incorpora- 
tion of  fraudulent  concerns.  For  the  biennial  period  1894-6, 
the  collections  were  $178,464.62,  considerably  more  than 
twice  that  for  the  preceding  two  years.  For  1896-8,  the 
collections  again  more  than  doubled,  to  $388,529.26;  and 
for  1898-1900  increased  to  $625,425.79.  Since  then  the 
changes  have  been  more  gradual;  and  for  the  biennial 
period  1906-08,  the  collections  from  corporation  fees  were 
$815,425.89.  This  amount  compares  favorably  with  the 
revenue  from  organization  fees  from  corporations  in  other 
States.  But  it  is  small  in  comparison  with  the  revenue 
of  a  number  of  the  eastern  states  from  special  taxes  levied 
annually  on  corporations,  based  on  capital  stock,  earnings 
or  dividends.  Moreover,  the  assessment  of  capital  stock  of 
Illinois  corporations  by  the  State  Board  of  Equalization 
is  not  of  sufficient  amount  to  produce  any  large  revenue 
either  for  the  state  or  local  authorities. 

Part  2.    Insurance  Companies:  Net  Receipts  and 
"Reciprocal"  Taxes. 

Domestic  insurance  companies  for  pecuniary  profit 
as  has  been  shown  are  taxed  the  same  as  other  corporations, 

2Hurd's  Revised  Statutes,  1908,  pp.  549,  5531  Laws  of  Illinois,  1893, 
p.  86;  1903,  p.  129. 


76  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [76 

on  their  tangible  property  and  their  "corporate  excess". 
Fraternal  benefit  societies  and  societies  operating  on  the 
assessment  plan  and  mutual  fire  companies,  have  no  capital 
stock  to  be  taxed.  Sec.  13  of  the  revenue  law  provides  that 

the  personal  property  of ..  .insurance  companies...  and  companies 
not  specially  provided  for  in  this  act,  shall  be  listed  and  assessed  in  the 
county,  town,  city,  village  or  district  where  their  business  is  carried  on, 
except  such  property  as  shall  be  liable  to  assessment  elsewhere  in  the 
hands  of  agents. 

This  means  that  insurance  companies  like  individuals 
must,  in  compliance  with  section  25  of  the  revenue  law, 
list  for  local  assessment  all  safes,  office  furniture,  and  other 
such  property,  all  bonds  and  stocks,  shares  of  stock  of  for- 
eign corporations,  money  and  credits,  and  franchises. 
However  an  exception  is  to  be  noted  in  the  case  of  do- 
mestic life  insurance  companies.  In  1905  section  13  of  the 
revenue  law  was  amended  as  follows: 

In  computing  the  taxable  property  of  life  insurance  companies 
organized  under  the  laws  of  this  State,  the  value  of  the  real  property  on 
which  the  company  pays  taxes  shall  be  deducted  from  its  net  admitted 
assets  above  liabilities,  as  testified  and  shown  by  the  latest  report  of  the 
Insurance  Superintendent,  and  the  remainder  shall  be  the  amount  of  the 
personal  property  for  which  the  company  shall  be  assessed. 

It  was  provided  that  this  law  should  not  apply  to 
fraternal  companies.  The  writer  is  of  the  opinion  that  the 
above  amendment,  whether  just  and  politic  or  not,  is  clearly 
unconstitutional;  for  in  deducting  liabilities  it  provides  for 
an  exemption  of  property  from  taxation  that  is  not 
authorized  in  the  constitution.  In  fact  an  exemption  which 
on  its  face  seems  far  more  justifiable,  has  recently  been  de- 
clared invalid  upon  the  ground  that  it  was  an  exemption 
that  the  constitution  of  Illinois  makes  no  provision  for. 
At  the  same  time  that  the  above  amendment  was  passed, 
the  general  assembly  also  amended  section  2  of  the  revenue 
law,  which  is  the  section  that  exempts  certain  kinds  of 
property,  by  adding  to  the  section  an  additional  clause, 
as  follows: 

Eleventh — All  the  money  collected  and  on  hand  within  this  State 
of  every  kind  and  nature  of  fraternal  beneficiary  societies  and  the  subordi- 
nate lodges  thereof,  which  are  organized  and  exist  or  admitted  to  do 


77]  FEES  AND  RECIPROCAL  TAXES  77 

business  under  the  laws  of  the  State  of  Illinois,  and  used  exclusively  for 
the  purposes  of  such  societies  and  not  for  profit. 

The  next  year  the  Board  of  Review  of  Effingham 
County  refused  to  allow  the  exemption  of  such  property 
owned  by  the  Supreme  Lodge  of  the  Modern  Fraternal 
Order.  The  Order  appealed  to  the  Auditor,  who  as  the 
law  requires,  certified  the  facts  of  the  case  to  the  Supreme 
Court.  That  body  decided  that  the  amendment,  clause 
"Eleventh"  to  section  2  of  the  revenue  law,  is  unconstitu- 
tional. If  these  fraternal  societies  were  "for  charitable 
purposes"3  the  constitution  would  permit  the  legislature  to 
exempt  their  property  from  taxation;  but  the  Court  held 
that  a  benefit  society  was  not  a  charitable  institution  within 
the  meaning  of  the  constitution,  for  its  contracts  of  insur- 
ance are  based  upon  valuable  considerations  and  are  legal 
and  enforceable  by  law.4  In  a  case  reviewed  by  the  Su- 
preme Court  in  1902,  the  Court  held  that  the  fact  that 
orders  had  been  drawn  upon  a  benefit  fund  prior  to  April 
1st  to  pay  beneficiaries  of  deceased  members,  does  not 
exempt  the  benefit  fund  from  taxation  even  to  the  extent 
of  such  orders,  if  no  part  of  the  orders  have  actually  been 
paid.5  If  these  liabilities  of  a  fraternal  society  against  its 
benefit  fund  are  not  deductable  from  its  money  and  credits 
at  assessing  time,  how  can  the  law  of  1905  be  justified 
which  provides  that  the  old  line  life  company  shall  deduct 
its  liabilities  (which  of  course  include  claims  unpaid) 
from  its  assets  in  listing  its  personal  property? 

In  the  last  chapter,  in  discussing  the  efficiency  of  the 
State  Board  of  Equalization,  it  is  shown  that  under  the 
present  division  of  assessment  between  the  local  assessors 
and  the  State  Board,  domestic  insurance  companies  are  not 
well  assessed  for  the  general  property  tax. 

3See  wording  of  Constitution. 

*Sup.  Lodge   Mod.   Am.  Fraternal  Order  vs.   Bd.   Rev.,  223  111.  54, 


8State  Council  of  Catholic  Knights  of  Illinois  vs.  Board  of  Review 
of  Effingham  County,  198  111.,  441  (1902). 


78  TAXATION  OP  CORPORATIONS  IN  ILLINOIS  [78 

Insurance  companies  do  not  pay  the  same  fees  for 
incorporation  as  do  business  corporations  in  general;  but 
each  class  of  insurance  company  is  required  to  pay  fees 
provided  for  in  the  act  under  which  it  seeks  to  do  busi- 
ness. The  State  receives  a  large  revenue  from  these  fees 
connected  with  the  incorporation  and  regulation  of  insur- 
ance companies,  both  from  the  old  line  companies  and  from 
the  assessment  companies. 

In  1869  the  insurance  laws  were  revised  and  a  com- 
plicated scheme  of  license  taxes  was  imposed.  Life  insur- 
ance companies  were  distinguished  from  fire,  marine  and 
inland  navigation  insurance  companies.  Since  1870  there 
has  been  passed  a  good  deal  of  additional  legislation  im- 
posing license  fees,  at  varying  rates,  on  different  classes  of 
insurance  companies — such  as  local  and  mutual  companies 
(1872,  1877  and  1887),  beneficial  and  fraternal  societies 
(1883  and  1893),  tornado  companies  (1889),  and  accident, 
surety  and  casualty  companies  (1899  and  1905).  By  act 
of  1909  fire  insurance  companies  are  required  to  pay,  in 
addition  to  taxes  previously  imposed,  not  exceeding  one- 
fourth  of  one  per  cent  of  their  gross  premium  receipts,  as  a 
fund  for  the  maintenance  of  the  office  of  state  fire  marshal. 

For  convenience  and  comparison  the  fees  required  of 
foreign  companies  of  the  same  class  as  domestic  companies 
doing  business  in  this  State  are  included  in  the  following 
statement  of  existing  license  fees  on  insurance  companies. 

Fire,  marine  and  inland  navigation  companies  of  Illi- 
nois pay  an  incorporation  fee  of  $30;  foreign  companies 
of  the  same  kind  paying  a  like  sum  for  filing  their  declar- 
ation and  charter ;  and  for  the  examination  of  and  appraisal 
of  the  securities  that  they  put  up  with  the  insurance 
department,  foreign  companies  pay  the  expense;  for  cer- 
tificate of  authority  to  agents,  Illinois  companies  pay  $  .50, 
foreign,  $2 ;  for  filing  annual  statements  both  domestic  and 
foreign  companies  pay  $10;  for  filing  copy  of  papers,  per 
folio  $.20  and  for  affixing  seal  to  the  same  $1 ;  for  examina- 
tion of  company's  financial  condition  whenever  the  Super- 


79]  FEES  AND  RECIPROCAL  TAXES  79 

intendent  of  Insurance  deems  it  necessary,  the  company 
must  pay  the  expenses. 

Surety  companies,  casualty  companies,  and  mutual 
burglary  and  casualty  companies  pay  the  same  fees,  ex- 
cept that  the  latter  pay  $30  for  the  fee  for  filing  the  an- 
nual report  instead  of  $10;  also  a  license  tax  of  two  per 
cent,  on  gross  premium  receipts.6 

County  fire  (mutual)  companies  pay  an  incorporation 
fee  of  $10  and  annual  fee  of  $1  for  filing  a  statement  as 
required  by  law.  Township  fire  and  lighting  (mutual), 
mutual  wind,  cyclone  and  tornado,  and  farmers'  county 
mutual  live  stock  companies  each  pay  an  incorporation  fee 
of  $10  and  $1  for  an  annual  renewal  of  certificate  to 
continue  business. 

Life  insurance  companies  pay  an  incorporation  fee 
of  $30;  foreign  companies  paying  an  admission  fee  of  the 
same  amount,  must  also  pay  a  fee  of  three  cents  on  eacli 
$1000  of  valuation  of  policies  underwritten  by  them;  for 
certificate  both  domestic  and  foreign  companies  pay  $2; 
for  filing  copy  of  papers,  per  folio  $.20,  and  $1  for  sealing 
same  and  certifying  it;  for  certificate  of  securities  de- 
posited with  the  Auditor,  a  fee  of  $.50 ;  and  $.25  for  attach- 
ing such  certificate  to  the  policy ;  also  to  pay  the  expenses 
incurred  by  the  department  of  insurance  in  examining  any 
company's  financial  condition.  The  same  fees  are  paid 
by  accident  life  companies,  except  that  there  is  no  provis- 
ion for  the  registration  of  securities  (the  $.50  and  $.25 
fees  above).  Life  and  accident  companies  doing  business 
on  the  assessment  plan  pay  $20  fees,  instead  of  $30,  to  start 
business;  other  fees  are  as  above.  Fraternal  life  and  acci- 
dent societies  pay  $5  for  certificate  of  authority  to  do  in- 
surance business  of  that  kind;  but  foreign  companies  of 
like  kind  pay  $10.  In  1905  a  law  was  passed  providing  for 
mutual  companies  against  loss  to  members  in  consequence 


6The  Insurance  Superintendent  under  date  of  March  23,  1909,  writes 
that  no  companies  of  the  latter  kind  are  doing  business  in  Illinois ;  and  that 
this  two  per  cent,  tax  is  obviously  as  invalid  as  the  two  per  cent  tax  of  1899. 


80  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [80 

of  accident  to  employees.  These  companies  are  left  outside 
the  regular  jurisdiction  of  the  Insurance  Department ;  but 
foreign  companies  are  required  to  pay  an  admission  fee 
of  $100. 

In  the  taxation  of  foreign  insurance  companies,  Illi- 
nois taxes  not  only  corporations  but  also  joint-stock  com- 
panies, partnerships  and  individual  insurers,  by  the  same 
laws.  The  right  to  do  this  was  sustained  by  the  United 
States  Supreme  Court  in  deciding  a  case  brought  to  it  by 
the  Liverpool  Insurance  Company  of  England,  appealing 
from  the  decision  of  the  Massachusetts  courts.7 

The  general  property  taxes  paid  by  these  companies 
are  the  same  as  already  shown  for  domestic  companies,  with 
the  exception  of  a  special  provision  in  the  revenue  law 
under  which  the  net  premium  receipts  of  foreign  insurance 
companies,  other  than  life,  are  assessed  and  taxed  as  per- 
sonal property.  It  is  of  interest  to  follow  the  historical 
development  of  this  tax. 

As  early  as  1844  a  three  per  cent,  license  tax  was  levied 
on  the  gross  premium  receipts  of  foreign  insurance  com- 
panies.8 This  was  paid  to  the  clerk  of  the  County  Commis- 
sioner's Court  every  six  months  and  by  him  forwarded  to 
the  State  Treasurer.  It  was,  in  the  words  of  the  statute, 
"to  be  considered  as  revenue  of  the  State,  and  by  the  State 
Treasurer  paid  out  as  such.-'  It  was  purely  a  state  tax. 
The  idea  was  probably  borrowed  from  the  Eastern  States. 
New  York  in  1824  began  to  tax  foreign  fire  companies  ten 
per  cent,  of  their  gross  annual  premium  collections  in  Xew 
York  ;9  in  1829  the  application  of  the  law  was  extended  to 
marine  companies ;  in  1837  the  rate  was  reduced  to  two  per 
cent.  Maryland  in  1839  imposed  a  two  per  cent  tax.  Our 
Illinois  Legislature  in  1843  evidently  expected  difficulty  in 
enforcing  their  three  per  cent,  tax  on  gross  premiums, 
since  they  provided  in  the  statute  that  the  penalty  for 

7Liverpool  Ins.  Co.  vs.  Massachusetts,  10  Wallace,  566  (1870). 
8Laws  of  111.,  1843,  p.  165. 
9Seligman,  Essays  on  Taxation,  p.  150. 


81]  FEES  AND  RECIPROCAL  TAXES  81 

withholding  any  of  the  tax,  was  the  infliction  of  a  fine 
equal  to  double  the  amount  withheld ;  and  half  was  to  go  to 
the  informer.  The  law  does  not  seem  to  have  gone  into 
effect  till  1844,  and  never  to  have  been  very  productive  of 
revenue.  The  following  table  shows  the  revenue  under  the 
law  while  it  was  in  force : 

1844  $  56.55 

1845  58.44 

1846  554-68 

1847  208.07 

1848  877.94 

1849  &  1850 1269.68 

1851  925.85 

1852  18440 

1853  17-67 

The  constitutionality  of  this  method  of  taxing  foreign 
insurance  companies  was  tested  in  the  Supreme  Court  of 
Illinois  in  1852.10  The  case  was  a  notable  one  in  the  history 
of  litigation  relative  to  the  taxation  of  corporations.  First, 
it  was  argued  that  the  law  was  a  violation  of  the  "com- 
merce clause"  of  the  constitution  of  the  United  States,  in 
that  it  was  a  regulation  of  commerce  among  the  states. 
But  the  Court  held,  that  issuing  insurance  policies  was  not 
commerce  within  the  meaning  of  the  "commerce  clause", 
and  therefore  the  law  was  constitutional.  The  decision  on 
that  point  has  been  sustained  by  a  series  of  United  States 
Supreme  Court  decisions.11  Second,  it  was  argued  that 
the  law  violated  the  "uniformity  clause"  in  the  Illinois 
constitution,  which  provided  that  "the  mode  of  levying  a 
tax  shall  be  by  valuation,  so  that  every  person  shall  pay  a 
tax  in  proportion  to  the  valuation  of  the  property  which  he 
or  she  may  have  in  his  or  her  possession."12  But  it  was 
held  by  the  court  that  the  tax  on  foreign  insurance  com- 
panies was  a  license  tax,  even  though  the  Clerk  issued  no 

10People  vs.  Thurber,  13  111.,  554  (1852). 

"Paul  vs.  Virginia,  8  Wallace,  168  (1868);  Hooper  vs.  California, 
155  U.  S.,  648  (1894)  ;  X.  Y.  Life  Ins.  Co.  vs.  Cravens,  178  U.  S.  (1900)  ; 
Nutting  vs.  Massachusetts,  183  U.  S.,  553  (1001). 

^Constitution  of   1818,  Art.   VIII,  Sec.  80. 


82  TAXATION  OF  CORPORATIONS  IX  ILLINOIS  [82 

licenses,  and  it  was  therefore  not  a  tax  within  the  meaning 
of  the  section  of  the  constitution  cited. 

The  next  y ear,  1853,  the  general  assembly  provided  a 
new  revenue  law  under  the  power  provided  in  the  constitu- 
tion of  1848.  Section  32  of  that  law  prescribed  the  method 
of  listing  the  real  and  personal  property  of  railroads,  turn- 
pike, plank  road,  insurance,  telegraph,  and  other  joint  stock 
companies,  except  corporations  whose  taxation  was  specific- 
ally provided  for  by  law.  But  the  section  ended  with  the  im- 
portant proviso,  that  every  agency  of  an  insurance  com- 
pany, incorporated  by  the  authority  of  any  other  state  or 
government,  should  return  to  the  assessor  of  the  county  in 
which  the  office  or  agency  of  the  company  was  kept,  in  the 
month  of  May,  annually,  the  amount  of  the  gross  receipts 
of  the  agency,  which  was  to  be  entered  on  the  tax  list  of 
the  county,  and  be  subject  to  the  same  rate  of  taxation  for 
all  purposes  that  other  personal  property  was  subject  to 
at  the  place  where  located.13 

The  changes  to  be  noted  are  three ;  first,  that  the  gross 
premium  receipts  by  the  law  of  1853  were  to  be  taxed  not 
under  the  State  power  to  levy  a  license  tax  on  business 
done  by  a  foreign  corporation  as  from  1843  to  1853,  but 
under  its  general  power  to  tax  the  property  of  persons  and 
corporations;  second,  that  the  property  of  foreign  insur- 
ance companies  in  the  shape  of  premium  receipts  was  to  be 
assessed  not  on  the  basis  of  the  amount  on  hand  on  May 
1st,  but  of  the  amount  collected  for  the  entire  year  pre- 
ceding May  1st;  third,  this  assessed  valuation  was  to  be 
subject  to  the  county  and  other  local  tax  rates  as  well  as 
to  the  State  tax  rate.  This  was  the  method,  in  general,  of 
taxing  foreign  insurance  companies  until  1869.  However, 
in  addition,  several  cities  in  their  special  charters  during 
this  time  were  granted  power  to  tax  and  regulate  foreign 
insurance  companies.  For  example,  Chicago  levied  a  two 
per  cent,  gross  premium  receipts  tax.  The  tax  from  the 
fire  companies  was  used  exclusively  to  promote  the  ef- 

13Revised  statutes,  1857,  p.  1037. 


83]  FEES  AND  RECIPROCAL  TAXES  83 

ficiency  of  the  fire  department,  and  for  the  disabled  fire- 
men's fund;  that  from  the  marine  companies,  for  the  im- 
provement of  the  river  and  harbor;  that  from  the  life 
companies,  for  the  improvement  of  sanitary  conditions.14 
In  1865  the  legislature  provided  that  this  special  tax  "for 
city  or  local  purposes"  on  any  life  insurance  company  was 
to  be  no  longer  permitted  to  the  cities,  but  their  right  to 
tax  fire  and  marine  companies  was  not  withdrawn.15 

In  1868  the  general  agent  of  a  New  York  insurance 
company  resisted  the  collection  of  the  general  property 
tax  upon  the  gross  premium  receipts  of  his  agency  on  the 
ground  that  the  law  of  1853  was  unconstitutional.  The 
Supreme  Court  of  Illinois  sustained  the  validity  of  the 
law16  and  the  insurance  company  appealed  to  the  United 
State  Supreme  Court.  There  it  was  argued  that  the  law 
violated  the  constitution  of  the  United  States,  which  pro- 
vides that  "the  citizens  of  each  state  shall  be  entitled  to  all 
the  privileges  and  immunities  of  citizens  of  the  several 
states."17  But  the  Court  held  that  a  corporation  is  not  a 
citizen  within  the  meaning  of  the  word  as  used  in  that 
particular  section  of  the  Constitution,  and  hence  the  Con- 
stitution was  not  violated  by  the  Illinois  law  in  question. 
Second  it  was  argued  that  the  law  violated  the  principle 
of  comity  between  states  in  that  it  discriminated  between 
domestic  and  foreign  corporations.  But  the  Court  held 
that  comity  between  states  is  not  obligatory  when  declared 
to  be  contrary  to  public  policy,  and  that  the  state  may  dis- 
criminate between  domestic  and  foreign  corporations,  even 
though  it  may  not  do  so  between  natural  persons  or  prop- 
erty. Hence  the  law  in  question  was  not  unconstitutional.18 

The  statutory  basis  of  the  present  methods  of  taxing 
receipts  of  foreign  insurance  companies,  was  laid  in  1869. 

"Private  laws  of  Illinois,  1863,  p.  98. 
15Laws  of  Illinois,  1865,  p.  88. 

16Ducat  vs.  City  of  Chicago,  48  111.,  1/2  (1868). 
"Const,  of  U.  S.,  Art.  IV,  sec.  2. 

18Ducat  vs.  City  of  Chicago,  10  Wallace  410  (1870),  following  Paul 
vs.  Virginia,  8  Wallace  168  (1868). 


84  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [84 

It  was  founded  on  the  constitution  of  1848.  Since  those 
sections  of  the  revenue  article  of  the  constitution  of  1848 
which  delegated  and  defined  the  taxing  power  of  the  legis- 
lature, were  practically  transferred  bodily  to  the  constitu- 
tion of  1870,  it  was  not  necessary  at  the  time  of  the  general 
revenue  act  of  1872  to  reenact  or  revise  the  insurance  laws 
of  1869,  in  regard  to  taxation. 

The  legislature  had  in  that  year  passed  two  general 
acts  for  the  incorporation  of  insurance  companies  in  Illi- 
nois; one  on  March  llth,  1869,  for  fire,  marine  and  inland 
navigation  insurance  companies;  the  other  on  March  26th, 
for  life  insurance  companies.  Both  acts  are  still  in  force. 
Neither  of  the  two  statutes  contains  sections  providing 
special  corporation  taxes  on  domestic  companies,  except 
fees;  but  both  contain  sections  providing  for  the  taxation 
of  foreign  companies  on  premium  receipts  and  also  for  tax- 
ing them  by  the  so-called  "reciprocal"  taxes.  The  act  rela- 
tive to  fire,  marine  and  inland  navigation  companies  con- 
tains a  section,  section  30,  which  provides  for  the  taxation 
of  foreign  companies  on  their  net  receipts,  instead  of  on 
their  gross  receipts,  as  from  1853  to  1869.19  The  language 
of  the  statute  was  indefinite  as  to  the  time.  The  Auditor 
in  1873  interpreted  it  to  mean  that  net  receipts  like  money 
or  any  other  suCh  form  of  personal  property  were  to  be 
returned  only  to  the  amount  that  was  on  hand  on  the  first 
day  of  May.20  But  he  was  mistaken.  In  1879  the  law  was 
amended  so  as  to  read  plainly  "net  receipts  of  such  agency 
for  the  preceding  year.''  In  1874  the  Supreme  Court  held 
that  a  company  was  taxable  on  premiums  in  course  of  col- 
lection (and  on  its  reassurance  reserve.)21  In  1905  the 
Supreme  Court  defined  net  receipts  to  mean  "gross  receipts 
less  operating  expenses,  not  including  fire  losses,  and 
[does]  not  [mean]  net  profits."22  Section  30  of  the  gen- 

19Laws  of  Illinois,  1869,  p.  228. 

20Report  to  Gen.  Assembly,  1873,  vol.  Ill,  p.  652,  copy  of  letter  to 
Ducat. 

"Republic  Life  Insurance  Co.  vs.  Pollak,  75  111.  292  (1874). 
"National  Fire  Insurance  Co.  vs.  Hanberg,  215  111.  378  (1905). 


85]  FEES  AND   RECIPROCAL  TAXES  85 

eral  act  for  incorporating  fire  companies  reads  as  follows : 

Sec.  30.  Every  agent  of  any  insurance  company  incorporated  by  the 
authority  of  any  other  state  or  government,  shall  return  to  the  proper 
officer  of  the  county,  town  or  municipality  in  which  the  agency  is  estab- 
lished, in  the  Month  of  May,  annually,  the  amount  of  the  net  receipts 
of  such  agency  (for  the  preceding  year)23  which  shall  be  entered  on  the 
tax  lists  of  the  county,  town  and  municipality,  and  subject  to  the  same 
rate  of  taxation  for  all  purposes,  state,  county,  town  and  municipal  that 
other  personal  property  is  subject  to  at  the  place  where  located,  said 
tax  to  be  in  lieu  of  all  town  and  municipal  license;  and  all  laws  and  parts 
of  laws  inconsistent  herewith  are  hereby  repealed :  Provided,  that  the 
provisions  of  this  section  shall  not  be  construed  to  prohibit  cities  having 
an  organized  fire  department  from  levying  a  tax  or  license  fee,  not 
exceeding  two  per  cent.,  in  accordance  with  the  provisions  of  their  re- 
spective charters,  on  (the)23  said  gross  receipts  (of  such  agency),23  to  be 
applied  exclusively  to  the  support  of  the  fire  department  of  such  city.23 

This  section  was  slightly  amended  in  1879  so  as  to 
express  in  exact  words  the  meaning  which  had  been  in- 
tended by  the  legislature  in  1869.  The  amendments  are 
indicated  above  in  the  parentheses. 

This  same  law  of  1869  provided  for  a  continuance  of 
the  charter  rights  of  certain  cities  to  levy  a  two  per  cent, 
license  tax  on  the  gross  receipts  of  foreign  fire  companies, 
for  the  benefit  of  their  fire  departments.24  This  right  had 
been  granted  to  those  cities  only  which  had  some  sort  tof 
organized  fire  protection.  In  1872  the  general  act  for  the 
incorporation  of  cities  contained  a  provision  of  the  same 
kind.25  In  1895  an  act  was  passed  extending  this  power  to 
all  cities  whether  organized  under  the  general  incorpora- 
tion act  of  1872  or  under  some  previously  passed  special 
act.26  It  was  for  the  benefit  no  doubt  of  those  cities  which 
had  received  their  charters  before  1872  and  had  not  been 
granted  power  to  license  and  tax  insurance  companies. 
Since  1872  they  had  come  to  have  organized  fire  depart- 
ments and  therefore  to  be  eligible  to  have  such  taxing 
power.  By  surrendering  their  old  charters  they  would 

23Law  of  1869  did  not  contain  words  inclosed  in  parentheses. 
24Laws  of  Illinois,  1869,  sec.  30,  p.  228. 
25Laws  of  Illinois,  1872,  p.  245. 
28Laws  of  Illinois,  1895,  p.  104. 


86  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [86 

have  been  able  to  come  under  the  general  act  of  1872  and 
have  the  coveted  taxing  power.  But  they  did  not  care  to 
surrender  their  old  charters ;  so  they  gained  their  point  by 
getting  the  law  of  1895  passed. 

It  must  be  noted  that  foreign  life  insurance  com- 
panies in  contra-distinction  to  foreign  fire  companies,  are 
not  required  to  list  their  net  receipts  for  assessment  and 
taxation  under  the  general  property  tax  of  the  State.  In 
1896  a  life  company  attempted  to  evade  other  taxes  imposed 
by  the  Auditor  by  returning  its  net  receipts  as  personal 
property  and  then  claiming  that  it  had  complied  with  the 
revenue  law.  But  the  Supreme  Court  held  that  the  law 
of  1869  in  regard  to  taxing  net  receipts  did  not  apply  to 
life  companies.27 

Reciprocal  Taxes 

Mention  must  now  be  made  of  a  new  feature  which  was 
added  to  the  Illinois  method  of  taxing  foreign  insurance 
companies  by  the  law  of  1869,  a  feature  which  is  retained 
to-day,  namely,  the  so-called  "reciprocal  taxes".  Since  the 
wording  of  the  law  is  necessary  to  a  clear  understanding 
of  its  constitution,  the  section  is  given  in  full. 

Sec.  29.  Whenever  the  existing  laws  of  any  state  of  the  United 
State,  or  any  other  kingdom  or  country,  shall  require  of  insurance  com- 
panies incorporated  by  or  organized  under  the  laws  of  this  state,  and 
having  agencies  in  such  other  states,  kingdom  or  country,  for  the  pro- 
tection of  the  policy  holders  or  otherwise,  any  payment  for  taxes,  fines, 
penalties,  certificates  of  authority,  license  fees  or  otherwise,  greater  than 
the  amount  required  for  such  purposes  from  similar  companies  of  other 
states  by  the  then  existing  laws  of  this  state,  then  and  in  every  case, 
all  companies  of  such  states  establishing  or  having  heretofore  established 
an  agency  or  agencies  in  the  state,  shall  be  and  are  hereby  required  to 
make  the  same  deposit,  for  a  like  purpose,  with  the  Auditor  of  this  state, 
and  to  pay  to  the  Auditor,  for  taxes,  fines,  penalties,  certificates  of  au- 
thority, license  fees,  and  otherwise  an  amount  equal  to  the  amount  of 
such  charges  and  payments  imposed  by  the  laws  of  such  states  upon  the 
companies  of  this  state  and  the  agents  thereof :  Provided  that  the  pay- 
ment required  of  such  foreign  companies  shall,  in  no  case,  be  less  than 
required  by  this  act. 

2TUnion  Central  Life  Ins.  Co.  vs.  Durfee,  164  111.  186  (1896). 


87]  FEES  AND  RECIPROCAL  TAXES  87 

To  the  every  day  reader,  this  section  of  the  insurance 
law  means  that  if  another  state  or  country  taxes  Illinois 
companies  in  any  way  higher  than  the  companies  of  that 
state  or  country  are  taxed  in  Illinois  then  the  Illinois 
Auditor  of  Public  Accounts  ( the  Insurance  Superintendent 
since  1894)  shall  impose  like  taxes  upon  the  companies 
from  that  state  or  country.  But  the  Supreme  Court  has 
held  an  interpretation  which  is  far  more  stringent.  For 
example,  in  1886  Louisiana  passed  a  law  providing  that 
foreign  companies  whose  gross  premiums  were  between 
|20,000  and  |30,000  should  pay  a  license  fee  of  f 400.  No 
Illinois  company  was  doing  insurance  business  nor  had 
been  doing  insurance  business  in  the  state  of  Louisiana. 
Nevertheless  Auditor  Swigert  proceeded  to  levy  a  "recip- 
rocal tax"  upon  a  Louisiana  company  doing  business  in 
Illinois.  He  did  so  on  the  ground  that  the  mere  passage 
of  u  law  by  Louisiana  purposing  to  tax  foreign  companies, 
was  sufficient  reason  for  retaliation  by  Illinois.  Our  Su- 
preme Court  sustained  Auditor  Swigert  in  his  interpreta- 
tion of  the  law.28 

The  constitutionality  of  the  "reciprocity  clause"  was 
passed  upon  in  1882.  The  case  was  as  follows.  The  State 
of  New  York  in  1880  enacted  a  law  taxing  foreign  compan- 
ies eight-tenths  of  one  per  cent,  on  insurance  premium  re- 
ceipts (other  than  life  and  mutual  benefit).  January 
1st,  1882,  Auditor  Swigert  of  Illinois  by  authority  of  the 
"reciprocity  clause"  of  the  law  of  1869,  which  up  to  that 
time  had  never  been  invoked,  imposed  a  like  tax  upon 
New  York  companies  for  the  year  1881.  They  paid  under 
protest  and  sued  for  recovery,  the  case  at  last,  in  1882, 
reaching  the  Supreme  Court.  Counsel  argued  (1)  that  the 
"reciprocal  provision"  was  unconstitutional  in  that  it 
amounted  to  a  delegation  of  Illinois  legislative  power  (the 
power  of  levying  taxes)  to  the  New  York  legislature.  But 
the  Court  held  that  it  was  not  a  delegation  of  power  even 

28Germania  Ins.  Co.  vs.  Swigert,  128  111.  237  (1889)  ;  reaffirmed,  Union 
Central  Life  Ins.  Co.  vs.  Durfee,  164  111.  186  (1896). 


88  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [88 

though  the  operation  of  the  "reciprocal"  provision  was 
contingent  on  the  enactment  of  possible  laws  in  other 
states.  Counsel  for  insurance  company  argued  (2)  that 
the  law  had  been  a  dead  letter  for  twelve  years.  But  the 
Court  held  that  the  fact  that  no  occasion  had  occurred  for 
its  use  was  no  argument  against  its  vitality  and  validity. 
(3)  It  was  contended  that  since  New  York  companies  were 
taxed  this  8/10  of  1  per  cent,  while  other  foreign  com- 
panies were  not,  that  it  was  a  violation  of  the  Illinois  con- 
stitution which  provides  that  taxes  on  corporations  shall  be 
uniform  as  to  class.  But  the  Court  held  that  by  the  ex- 
press provisions  of  the  "reciprocity  clause",  companies  of 
such  foreign  states  (as  New  York)  are  "constituted  a  dis- 
tinct class  for  the  purposes  of  assessment  and  taxation 
here."29 

That  this  law  might  have  been  enforced  during  its 
twelve  year  fallow  period  if  the  Auditor  had  set  about  it, 
may  be  inferred  from  a  remark  of  the  Attorney  General  in 
1882  in  his  report  to  the  General  Assembly.  "Under  this 
decision",  referring  to  the  above,  "and  through  the  vigil- 
ance of  the  Auditor  a  considerable  revenue  will  be  obtained 
for  the  state  that  has  heretofore  been  lost."30  This  may  be 
indicated  also  in  a  statistical  way.  Ever  since  1872  the 
Auditor,  as  required  by  law,  has  reported  the  fees  collected 
from  insurance  companies.  While  he  does  not  give  separ- 
ate account  of  those  taxes  collected  from  foreign  companies 
under  this  "reciprocal  tax",  a  bulge  in  the  returns  about  the 
time  of  this  decision  in  1882  and  thereafter  indicates  the 
presence  of  "reciprocal"  taxes  in  the  sums. 

The  revenue  from  insurance  fees  for  the  biennial 
period  1870-72  was  $21,972.65 ;  and  the  revenue  from  this 
source  increased  but  slowly  to  $46,074.95  for  1880-82.  With 
the  enforcement  of  the  "reciprocal  taxes"  from  foreign  com- 
panies in  the  next  biennium  there  was  a  marked  increase  to 
$168,131.39;  and  since  then  the  revenue  from  insurance 

29Home  Ins.  Co.  vs.  Swigert,  104  111.  653  (1882). 
30Rep.  to  Assembly,  1882,  vol.  I.    Att'y  Gen.,  p.  I3E. 


89]  FEES  AND  RECIPROCAL  TAXES  89 

companies  has  continued  to  increase  rapidly.  In  the  two 
years  1894-6,  the  revenue  amounted  to  $328,475.42;  for 
1900-02  it  was  more  than  $600,000;  and  for  the  past  few 
years  has  averaged  about  $500,000  a  year.  Whatever  may 
be  thought  of  the  incidence  or  the  equity  of  the  "reciprocal 
tax"  on  foreign  insurance  companies,  it  is  a  productive  tax. 

Up  to  1893,  the  insurance  fees  and  taxes  were  collected 
by  the  Auditor  of  State.  In  that  year  a  separate  Insur- 
ance Department  was  established  under  the  direction  of 
the  Superintendent  of  Insurance,  who  collects  the  revenue 
and  pays  it  over  to  the  State  Treasurer.  A  comparison  of 
the  collections  reported  by  the  Insurance  department  with 
the  amounts  paid  over  to  the  State  Treasurer,  shows  that 
up  to  1904,  the  latter  amounts  for  each  fiscal  biennium 
corresponded  with  the  collections  for  the  two  calendar 
years  ending  the  preceding  December.  In  the  biennial 
period  ending  Sept.  30,  1906,  the  treasury  receipts  appear 
to  include  the  collections  for  the  three  calendar  years  1904, 
1905  and  1906,  as  well  as  some  refunds  by  a  former  Super- 
intendent of  Insurance.  During  1906-08,  the  treasury 
receipts  include  some  further  refunds  of  the  same  kind. 

The  following  tables  show  the  revenue  from  corpor- 
ation fees  and  from  insurance  companies  from  1870,  and 
the  fees  and  taxes  collected  by  the  Insurance  Department 
since  1893. 


90 


TAXATION  OF  CORPORATIONS  IN  ILLINOIS 


[90 


TABLE  III 
CORPORATION  FEES  AND  INSURANCE  FEES  AND  TAXES 


BIENNIAL  INSURANCE 

PERIOD  FEES  AND  TAXES  (  ° ) 

1870-72*    $     21,972.65 

1872-74*    31,467.87 

1874-76^    35,620.54 

1876-78 35,374-10 

1878-80    38,137.20 

1880-82    46,074.95 

1882-84    168,131.39 

-1884-86    127,854.55 

1886-88    121,822.09 

1888-00    162,535.29 

1800-92    171,472.26 

1892-94    117,275-58 

1894-96    328,475-42 

1896-98    356,826.87 

1898-1900    358,448.50 

1900-02    622,759.87 

1902-04    593,001.16 

1004-06    1,224,662.82 

1006-08    939,854.20 

1008-10    926,819.30 


CORPORATION 
FEES (&) 


$  7,629.89 
11,934.05 
12,125.95 

21,699.24 

33,587.68 

74,054.02 

178,464.62 

388,529.26 

625,452.79 

555471-28 

680,681.17 

747,503.48 

815.425-89 


(°)  Received  by  State  Treasurer.  Compiled  from  Reports  of  Auditor 
of  Public  Accounts. 

(6)  Collected  by  Secretary  of  State.  Compiled  from  Reports  of 
Secretary  of  State. 

(c)  Fiscal  year  ending  Nov.  30. 

(<0  Fiscal  year  ending  Sept.  30. 


91] 


FEES  AND  RECIPROCAL  TAXES 


91 


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6  July  20  —  Dec.  31,  1893,  by  Insurance  Supei 
c  Total  for  1893. 
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CHAPTER  VI. 

OBSERVATIONS  AND  DEDUCTIONS 

In  1889  Auditor  Swigert  defended  the  present  system 
of  taxing  corporations  and  presented  resolutions  from  the 
Board  of  Equalization  which  averred  that,  as  an  assessor 
of  corporations,  it  was  doing  better  work  than  local  asses- 
sors of  property  were  doing.  On  the  other  hand,  in  1895 
Governor  Altgeld  called  a  special  session  of  the  general 
assembly  to  do  away  with  the  system  because  of  its  poor 
work  with  corporations.  In  1911,  a  Special  Tax  Commis- 
sion authorized  by  the  forty -sixth  assembly,  reported  as  its 
opinion  of  the  State  Board  of  Equalization  that 

the  large  membership  of  the  board,  its  elective  character,  its  inadequate 
powers  and  the  short  time  which  is  allotted  to  it  to  perform  its  duties, 
prevent  it  and  would  prevent  any  similar  board,  from  becoming  a  very  ef- 
ficient body  in  the  administration  of  the  tax  laws.1 

As  a  basis  for  discussing  these  opposing  views  of  the 
work  of  the  State  Board  of  Equalization,  some  statistical 
data  in  regard  to  the  assessments  made  by  this  body  are 
presented  in  the  following  table. 

In  1873,  the  first  year  of  capital  stock  assessments,  the 
State  Board  of  Equalization  assessed  the  excess  value  of 
capital  stock  of  corporations,  other  than  railroads  and  the 
Western  Union  Telegraph  Co.  at  $20,730,057.  This  included 
34  public  service  corporations,  assessed  at  $6,325,216,  and 
170  other  corporations  at  $15,573,235.  The  next  year,  224 
corporations  were  assessed  on  their  capital  stock  but  the 
total  assessment  was  only  $11,719,216.  In  1875,  only  100 
corporations  were  assessed,  for  $4,802,112;  and  by  1877 
only  33  corporations  were  assessed  for  $1,605,783.  The 
total  assessed  valuation  of  all  property  in  the  state  had  also 
declined,  from  $1,355,401,307  in  1873  to  $931,199,308  in 
1877 ;  but  the  capital  stock  assessments  had  been  reduced  in 

i  of  th.  Special  Tax  Commission,  January  15,  1911. 
92 


93] 


OBSERVATIONS    AND    DEDUCTIONS 


93 


TABLE  V. 

CAPITAL     STOCK     ASSESSMENTS     OF     ILLINOIS     CORPORATIONS, 

OTHER  THAN  RAILROAD  COMPANIES,  BY  THE  ILLINOIS 

STATE  BOARD  OF  EQUALIZATION,  1873-1910. 

[COMPILED  FROM   PROCEEDINGS  OF  THE  STATE  BOARD  OF  EQUALIZATION.] 


YEAR 

No.  OF 
CORPORA- 
TIONS 
ASSESSED 
a 

VALUE  OF 
CAPITAL 
STOCK 
REPORTED 

FULL 
VALUE  OF 
CAPITAL 
STOCK  & 
FRANCHISE 

EQUALIZED 
VALUE  OF 
CAPITAL 
STOCK  & 
FRANCHISE 

EQUALIZED 
VALUE  OF 
TANGIBLE 
PROPERTY 

NET 
ASSM'T 

OF 

CAPITAL 

STOCK 

1873 

207 

$  20,730,057 

1874 

224 

$  40,777,920 

$  38,958,489 

$  25,118,105 

$  13,398,889 

$  11,719,216 

1875  

100 

28,750,356 

20,548,266 

10,283,176 

7,285,636 

4,802,112 

1876 

87 

3,373,751 

1877 

33 

1,605,783 

1878 

46 

1,837,556 

1879 

40 

2,218,370 

1880 

29 

2,179,460 

1881 

61 

2  191  488 

1882 

91 

2  397,986 

1883 

85 

2,218,430 

1884 

80 

2,087,902 

188S 

114 

54,832,525 

9,078,083 

5,286,460 

3,791  623 

1886 

148 

51,916,688 

8,942,358 

5,185,781 

3,756,577 

1887 

217 

66,319,922 

10,241,903 

6,670  997 

4  289,706 

1888 

246 

95,888,014 

13,158,666 

8,069,435 

5  089,231 

1889 

284 

89,721,889 

13,431,629 

8,594,313 

4,857  545 

1890 

305 

100,842,771 

14,582,584 

9,007,615 

6,956,909 

1891  .  ... 

373 

115,210,045 

15,939,336 

11,493,980 

6,273  693 

1892 

322 

120,580  801 

15  933  182 

11  287  807 

6  549  202 

1893 

237 

92,724,506 

14,503,129 

9  139  150 

5  363  979 

1894  

249 

167,045,035 

15,735,390 

10  740  613 

4  994,747 

1895  

252 

179,177,258 

14,975,288 

10,192,779 

4,782,509 

1896 

251 

139,331,694 

14,794  660 

10  764  276 

4  030  384 

1897   . 

273 

170,304,024 

15  908  424 

11  857  591 

4  050  833 

1898  

236 

146,416,190 

14,694,000 

12  260  595 

2  433  425 

1899 

302 

202,470  405 

132  575  625 

26  515  125 

24  166  922 

2  348  203 

1900&  

266 

236,067,920 

129,489,040 

25,897,808 

21,089,178 

4,808,630 

1901  

328 

287,948,878 

392  761  090 

78  5"32  218 

57  074  275 

21  477  943 

1902 

1988 

398,540  701 

283  859  235 

56  771  847 

34  egg  220 

22  705  627 

1903  

1520 

253  613  202 

199  408  930 

39  88i  786 

24  715  682 

15  116  104 

1904  

1442 

384,585,475 

181  933  195 

36  386  139 

23  353  727 

13  032  412 

1905  ...  . 

1218 

304  407  993 

189  669  395 

37  933  879 

24  990  909 

12  942  970 

1906  

1832 

409,493  895 

300  387  685 

60  077  537 

47  077  537 

12  665  601 

1907  . 

1302 

333  628  590 

269  504  175 

53  900  835 

43  292  835 

10  608  000 

1908  

1281 

364  763  492 

304  300  790 

60  860  158 

42  176  710 

18  638  448 

1909  
1910  

1168 
2154 

328,077,216 

261,362,997 

87,120,999 

51,726,558 

35,394,441 
30  347  348 

1911  

930 

30,568,450 

a  See  Table  I  for  number  of  corporations  not  reporting  and  the  number  of  corporations  found 
to  have  no  "excess"  over  tangible  property. 
b  Original   assessment. 


94 


TAXATION  OP  CORPORATIONS  IN  ILLINOIS 


[94 


TABLE  VI. 

ASSESSMENTS    BY    ILLINOIS    STATE    BOARD    OF    EQUALIZATION, 
1873,  1880,  1890,  1902,  1908,  1909. 

1873- 


COOK  COUNTY 

•  OTHER  COUNTIES 

TOTAL 

Equalized   Value   of   Rail- 
road  Track  and   Rolling 
Stock  

$3  611  282 

$cc  706.126 

$TO.1  1  7.4O8 

Capital  Stock  — 
Railroads  

(n)     2510982 

(48)    62,100089 

(51)     64611071 

W.  U.  Telegraph  Co  

(l)             71,211 

(i)      1,00^,141 

(l)        I,l68,394 

Other      Public      Service 
Corporations  

(o)        ^,CK2.O77 

(27)        1.273.  I**Q 

(76)       6.12S.216 

Other  Corporations  

(ll)       6.lSl  127 

(l4^)        7.821.314 

(178)     14.404,841 

Total  Capital  Stock  

(l6)     I4.2IQ.8lQ 

(210)  72.280,68'? 

(266)     86,509,522 

Total  by  State  Board  of 
Equalization  

$17811.121 

$127  00^  8OO 

$145.826.010 

1880. 


Railroad   Track   and   Rol- 
ling Stock  

$4.114,124 

$4O.287.60I 

$44.601.  Si8; 

Capital  Stock  — 
Public  Service     Corpora- 
tions     

(6)            5I4.OOO 

(14)           2H.78Q 

(20)         760,780 

Other  Corporations  

(?)        i  24  S  207 

(6)        164.374 

(n)          T  AQQ  671 

Total  Capital  Stock  

(9)    1,759,297 

(20)    420,163 

(29)     2,179460 

Total   by   State   Board   of 
Eaualization   . 

$  6.O71.42I 

$40.707.8  =54 

$46.781.27'? 

1890. 


Railroad   Track    and   Rol- 
ling Stock 

$12,075,785 

$60,718,611 

$72,794,396 

Capital  Stock  — 
Public  Service  Corp'ns  .  . 

(26)      3,726,335 
(66)      1,277,860 

(112)      1,094,915 

(1  10)           857,799 

(138)      4,821,250 
(176)      2,135,659 

(85)      5*004,195 

(223)      1,952,714 

(314)      6,956,909 

Total   by   State   Board   of 
Equalization  

$17,082,880 

$62,668,425 

$79,751,305 

95] 


OBSERVATIONS    AND    DEDUCTIONS 
TABLE  VI.— (CONTINUED) 


95 


1902. 


COOK  COUNTY 

OTHER  COUNTIES 

TOTAL 

Railroad   Track   and   Rol- 
ling Stock  

$20.628.0  V* 

$64  QOO  IOQ 

$Ss  610  042 

Capital  Stock 
Railroads  

(6)     2,649,410 

(2)             1,642 

(8)     2651,062 

Other      Public      Service 
Corporations    

(23)    15,794,471 

(194)      1,103,621 

(217)    16,808,092 

Other  Corporations  

(1449)      5,395,595 

(322)        411,940 

(1771)     5,807,535 

Total  Capital  Stock  

23.8  30.476 

i.  517,213 

2=;.  3^6,680 

Total   by   State   Board   of 
Equalization  

•f/l/j^fiRj/inr) 

$66,507,322 

$110,975,731 

1908. 


Railroad   Track   and   Rol- 
ling Stock  — 
Steam  Roads  

$19,081,386 

$75,786,127 

$94867,513 

Electric  Roads  

5,824,501 

2,733,130 

8,557,631 

Total  

$24,905,887 

$78,519,257 

$Tn3>/l^5)T/1/l 

Capital  Stock  — 
Railroads  

(6)      1,159,542 

(4)        932,674 

(8)      4,092,306 

Public  Service  Corp'ns.. 
Other  Corporations  

(n)    16,863,000 
(872)      1,261,208 

(30)        360,000 
(204)        209,150 

(41)    17,213,000 
(1076)      1,49*0^448 

Total  Capital  Stock  

(889)    19,273,840 

(238)      1,501,914 

(1125)    20,775,744 

Total   by   State   Board   of 
Eaualization   . 

$44.179,727 

$80.021.171 

$124,200,888 

1909. 


Railroad    Track    and    Rol- 
ling Stock  — 
Steam  Roads  

$32,309,833 

$129,121,743 

$161,431,576 

Electric  Roads  

$9,409,919 

4,842,098 

14,252,017 

Total  

$41,719,752 

$133,963,831 

$175,683,693 

Capital  Stock  — 
Railroads    

(8)      1,629,766 

do)     1,345,515 

(15)       2,975,28l 

Public  Service  Corp'ns.. 
Other  Corporations  

(44)    30,903,341 
(920)      3,540,500 

(102)           733,000 
(IO2)          2l6,7OO 

(146)     31,637,241 
(lO22)       3,767,200 

Total  Capital  Stock'  

(972)    36,073,607 

(214)         ,296,115 

(1183)     38,379,722 

Total   by   State   Board   of 
Eaualization  .  . 

$77.70.3-3  SO 

$1.36.259.946 

$214,06.3.413 

96  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [96 

TABLE  VII 
ASSESSED  VALUATION  OF  SPECIFIED  CORPORATIONS 


QUINCY 

CHAMPAIGN- 

PULLMAN 

PACIFIC 

HORSE  RAIL- 

ST.   Louis 

TRADER'S 

URBAN  A 

YEAR 

PALACE 

HOTEL   Co. 

WAY  AND 

NATIONAL 

INSURANCE 

GAS,   LIGHT 

CAR    Co. 

(CHICAGO) 

CARRYING 

STOCK 

Co. 

AND  COAL 

Co. 

YARDS   Co. 

(CHICAGO) 

Co. 

1873   t 

$  

$.. 

$.. 

$.., 

$.. 

"w/  w      * 

a 

a 

a 

a 

a 

a 

a 

B 

2,100,000 

350,000 

35,ooo 

350,000 

131,839 

34539 

1874  t 

"570,000 

2Q.40O 

**-'/  *T        • 

a 

a 

+Jt  "* 

360,000 

a 

a 

a 

-*;7»*TVV 
I4IIO 

B 

Not  listed 

210,000 

30,000 

Not  listed 

396,745 

15,300 

1879  t 

a 

a  .... 

b 

b 

b 

b 

b 

B 

120,000 

b 

b 

b 

b 

b 

1884  t 

a 

a 

a 

a 

a 

a 

a 

B 

144,000 

Not  listed^ 

5,000 

100,000 

15,000 

5.000 

1889  t 

1,091,360 

People's  Gas 

20,000 

250,000 

146,000 

12,500 

a 

704558 

Light  &  Coke 

16,965 

140,287 

112,500 

4327 

B 

386,802 

Company 

3,035 

109,713 

33,500 

8,123 

1894  t 

1.743,595 

250,000 

40,000 

266,000 

110,000 

16,000 

a 

1,149,771 

227,984 

23,445 

102,596 

100,100 

13,950 

B 

593,824 

22,015 

i6,555 

163,404 

9,900 

2,050 

1900  t 

2,890,365 

3,865,893* 

60,000 

275,000 

187,095 

50,000 

a 

2,400,365 

3,415,893 

28,393 

235,368 

137,095 

25,045 

B 
1901  t 

400,000 
4,512,648 

450,000 
8,642,390* 

31,607 
75,000 

29,632 
263,181 

50,000 
170,022 

24955 
59,933* 

a 

3,012,648 

2,859,393 

47,244 

213.181 

110,022 

29,933 

B 

1,500,000 

5,782,997 

27,756 

50,000 

60,000 

30,000 

1902  t 

4791,667 

8,983,547 

74282 

246,477 

169,805 

49,588 

a 

3,143,626 

4303.668 

48,266 

196,477 

109,805 

29,588 

B 

1,648,041 

4,679,879 

26,016 

50,000 

60,000 

20.000 

1908  t 

23,348,90o/ 

9,8/9,753 

76,800 

50,000 

9 

54i85 

a 

21,348,900 

4,898,955 

56,800 

a 

9 

52,185 

B 

2,000,000 

4980,798 

20,000 

50,000 

9 

2,000 

1911  t 

10,297,865 

18,012,400 

141,144 

40.000 

9 

97,789 

a 

6,043,487 

10,195,860 

107,144 

a 

9 

04,789 

B 

4254378 

7,816,540 

34,000 

40,000 

9 

3.000 

t  means  total  tax  valuation  for  the  year. 

a  means  local  assessor's  valuation  on  tangible  property,  equalized. 

B  means    Board   of   Equalization's   assessment    of   "excess". 


a     Data  not  to   be  found  in  the  report  of  the  Board's  proceedings. 

b  No  figures  given;  but  Board  reports  company  in  the  list  of  those  which  it  found  to  have  no 
"corporate  excess"  over  and  above  the  equalized  value  of  tangible  property  locally  assessed. 

C  The  Pacific  Hotel  goes  out  of  business  or  changes  name;  it  was  put  into  this  list  because 
it  was  one  of  the  first  to  fight  the  assessment  of  the  Board  of  Equalization. 

d     Urbana  and  Champaign  Railway,  Gas  and  Electric  Co.  from  here  on. 

e  This  was  one  of  the  twenty  companies  re-assessed  by  the  Board  in  1901  for  the  year  1900, 
under  the  established  rules  as  ordered  by  the  Supreme  Court  of  the  State.  As  corrected 
its  1900  assessment  is:  total  equalized  value,  $12,632,960;  assessment  by  local  assessor, 
$3,415,893;  assessment  by  Board  $9,217,067.  It  should  be  noted,  too,  that  the  re-assessment 
of  this  and  the  other  nineteen  companies  raised  the  total  assessment  for  the  state  about 
$32,000,000  above  the  figures  given  in  the  Board's  report. 

/  In  1906  the  Board  for  the  first  time  put  the  Pullman  Co.  up  to  the  range  of  valuation  it 
now  enjoys,— $28,744,481  in  1906  and  $27,180,920  in  1907. 

g  This  company  was  rendered  insolvent  by  the  great  losses  it  sustained  in  the  San  Francisco 
conflagration.  (Insurance  report  for  1907). 


97]  OBSERVATIONS    AND    DEDUCTIONS  97 

a  much  greater  proportion — from  1.3  per  cent  to  .17  per 
cent  of  the  total  assessed  valuation  of  the  state. 

In  1880  only  29  corporations  (the  minimum  number) 
were  assessed  on  their  capital  stock.  After  this  date  the 
number  of  corporations  assessed  increased,  and  the  assessed 
valuation  of  capital  stock  also  increased  slowly  to  $6,956,- 
909  in  1890.  By  the  latter  date,  more  than  two-thirds  of  the 
capital  stock  assessment  was  on  public  service  corpora- 
tions. During  the  next  decade,  the  capital  stock  assess- 
ments again  declined  to  a  minimum  of  $2,348,203  on  302 
corporations  in  1899.  This  was  about  .25  per  cent  of  the 
total  assessed  valuation  of  all  property  in  the  state. 

Following  the  Teachers  Federation  case,  the  capital 
stock  assessments  showed  a  sudden  increase,  both  in  the 
number  of  corporations  and  the  aggregate  assessed  value, 
to  $22,705,627  (about  2.2  per  cent  of  the  total  assessed 
valuation)  on  1988  corporations  in  1902.  More  than  three- 
fourths  of  the  total  assessment  was  on  217  public  service 
corporations.  But  this  increase  was  followed  by  a  steady 
decrease  for  five  years,  to  an  assessment  of  $10,608,000  on 
1302  corporations  in  1907.  In  1908  capital  stock  assess- 
ments amounted  to  $18,683,448;  and  in  1909  under  the  new 
rule  providing  that  the  taxable  value  should  be  one-third 
of  the  market  value  instead  of  one-fifth  as  formerly,  the 
capital  stock  assessments  of  corporations  other  than  rail- 
roads by  the  State  Board  of  Equalization  was  $35,394,441, 
— about  1.7  per  cent  of  the  total  equalized  valuation  of 
$2,158,648,450  for  all  property  in  the  state. 

The  increase  in  capital  stock  assessments  since  1900 
has  been  mainly  due  to  the  assessments  on  a  small  num- 
ber of  corporations  in  Cook  County.  In  1909,  the  capital 
stock  assessments  on  corporations  other  than  railroads  in 
Cook  County  was  $34,443,841,  of  which  $30,903,341  was  on 
44  local  public  service  corporations.  In  all  the  other  coun- 
ties, the  capital  stock  assessments  were  only  $950,600,  less 
than  three  per  cent  of  the  total  for  the  state;  and  of  this 
$733,900  was  for  local  public  service  corporations. 

Of  the  1168  corporations  assessed  for  capital  stock  in 


98  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [9S 

1909,  only  15  were  assessed  for  as  much  as  $100,000,  and 
only  95  for  as  much  as  $10,000.  The  others  were  assessed 
for  a  few  thousand  or  a  few  hundred  dollars  each. 

The  companies  whose  assessments  are  shown  in  Table 
VII  are  fairly  representative  of  different  interests  and  dif- 
ferent business  locations.  The  years  chosen  are  those  cov- 
ered by  seven  Boards  differing  in  personnel.  Lean  and  fat 
business  years  are  both  represented.  And  years  of  placid 
administration  by  the  Board,  1884  and  1889,  are  chosen  to 
compare  with  such  troublous  years  as  1900  and  1901  when 
outside  pressure  from  the  courts  and  others  was  brought 
to  bear  upon  them. 

At  best,  a  statistical  table  can  only  tell  half  the  truth. 
For  example  it  may  be  noted  that  the  assessment  by  the 
Board  in  1873  was  not  equaled  again  till  after  1901.  Even 
as  late  as  1894  the  "excess"  was  only  $4,994,777.  The 
Bureau  of  Labor  Statistics  of  Illinois,  in  its  report  on  Illi- 
nois taxation,  which  has  been  noted  all  over  the  country, 
compared  the  assessment  by  the  Board  in  1894  writh  that 
made  in  1873 — the  ratio  is  5  to  22 — and  used  this  compari- 
son as  a  count  in  condemning  the  Board's  efficiency  as  an 
assessor  of  corporations.  Neither  by  way  of  defending  the 
Board  nor  by  way  of  casting  reflections  on  the  Bureau's 
statistical  methods,  but  simply  to  show  that  such  a  com- 
parison is  not  wholly  fair,  it  must  be  explained  that  since 
1873  conditions  have  materially  changed.  1.  The  figures 
for  1873  include  the  assessment  of  the  Western  Union 
Telegraph  Company  which  was  vacated  by  the  Supreme 
Court;  and  also,  as  has  been  mentioned  before,  the  assess- 
ment was  abnormally  high  in  1873,  its  initial  year,  because 
of  padding  of  the  debt  returns  by  the  companies.  They 
were  under  the  mistaken  idea  that  it  would  reduce  the 
assessment  on  their  capital  stock,  whereas  the  opposite 
result  was  actually  occasioned.  Moreover  other  property 
was  valued  at  a  higher  rate  in  1873  than  at  any  time  since. 
2.  The  figures  for  1879  and  all  the  years  since  then  would 
be  considerably  higher  if  certain  classes  of  corporations 
wrhich  wrere  assessed  in  1873  had  not  been  exempted  from 


99]  OBSERVATIONS    AND   DEDUCTIONS  99 

the  Board's  jurisdiction  by  laws  passed  in  1879,  1893  and 
1905.  And  this  exemption  includes,  as  we  have  seen  in 
chapter  IV,  the  exemption  of  thousands  of  corporations, 
some  of  them  being  eight  figure  concerns,  and  with  hun- 
dreds of  millions  of  capital  stock.  The  simple  fact  then, 
that  in  1894,  as  the  Labor  Bureau  pointed  out,  the  Board's 
assessment  of  "corporate  excess"  to  corporations  was  not 
as  great  as  it  was  in  1873,  is  not  in  itself  prima  facie  evi- 
dence of  the  Board's  inefficiency. 

Again,  a  study  of  the  Board's  reports  will  lead  to  the 
deduction  that  often  an  increase  in  assessment  by  the 
Board  has  been  followed  by  an  increase  in  the  assessment 
of  tangible  property  by  the  local  assessor;  and  since  such 
a  local  assessment  has  to  be  deducted  by  the  Board  from 
the  total  valuation  so  as  to  determine  a  corporation's 
"excess",  the  consequence  is  that  the  next  year  it  appears 
as  if  the  Board  had  not  assessed  the  corporation  as  high  as 
it  did  the  year  before.  For  example,  table  VII  shows  that 
the  Board's  capital  stock  assessment  to  the  Pullman  Com- 
pany has  never  been  as  high  again  as  it  was  in  1873.  When 
the  Board  levied  a  large  assessment,  the  local  assessors 
raised  their  assessments.  Another  illustration  may  be  noted 
in  the  case  of  the  Urbana-Champaign  Kailway,  Gas  and 
Electric  Company  in  the  years  1901,  1902,  and  1908.  A 
fairer  basis  to  use  in  judging  the  Board's  efficiency  would 
be  that  of  the  yearly  valuations  which  it  puts  upon  a 
corporation's  entire  property — that  is,  the  full  value  before 
being  equalized.  But  such  data  are  not  available.  Reference 
to  Table  I  will  show  that  in  nineteen  of  the  forty  years  of 
its  administration,  the  Board  has  kept  to  itself  all  informa- 
tion of  its  proceedings  on  that  point.  Further,  twenty-five 
times  only  out  of  the  thirty-seven  has  it  shown  even  what 
the  total  equalized  value  was,  and  in  eight  of  the  twenty- 
five  cases  has  failed  to  disclose  the  basis  of  its  equalization. 
This  leaves  seventeen  years  of  figures;  but  from  those 
must  be  deducted  eight  on  account  of  the  unspecified  under- 
valuation since  1902.  So  the  hope  of  securing  statistics 


100  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [100 

on  the  actual  value  of  the  corporations  as  considered  in 
the  Capital  Stock  Committee  must  be  given  up. 

If  we  compute  the  ratio  of  the  Board's  total  valua- 
tion of  corporations  to  the  total  valuation  of  property  in 
the  state,  we  find  that  in  1873  this  was  22  to  1355 ;  in  1899  it 
was  13  to  792 ;  in  1894, 16  to  824 ;  in  1900,  25  to  810 ;  in  1901, 
78  to  999 ;  in  1908,  61  to  1263.  Thus  it  appears  from  1889 
to  1901  the  total  valuation  of  the  corporations  which  were 
assessed  by  the  Board  increased  more  rapidly  than  the  total 
tax  valuation  of  the  state;  but  from  1901  to  the  present 
the  Board's  valuation  of  corporations  has  fallen  behind. 
But  here  again  the  comparison  is  from  insufficient  data. 
There  are  no  statistics  as  to  the  valuation  put  by  the  Board 
upon  those  corporations  whose  valuation  was  found  to  be 
equal  to  or  less  than  the  value  assessed  by  the  local  assessor. 
Such  statistics  as  wrould  be  of  use  can  not  be  secured  from 
the  Board's  reports.  So  the  resolutions  of  the  Board  in 
1888  to  the  effect  that  its  assessment  of  corporations  "as 
shown  by  its  reports"  was  increasing  while  local  assess- 
ments of  all  property  in  the  state  was  decreasing2  may  be 
taken  with  a  grain  of  salt. 

Tli is  statement  leads  to  the  consideration  of  the  other 
side  of  the  case.  Was  Governor  Altgeld  correct  in  his 
assertion  that  the  present  system  is  "a  giant  of  injustice", 
that  most  of  the  smaller  corporations  are  properly  taxed 
while  many  of  the  larger  ones  escape?3  It  can  not  be  proved 
from  Table  VI,  but  the  conjecture  can  be  supported  by 
certain  facts.  It  will  be  recalled  from  the  previous  discus- 
sion that  1900  and  1901  were  years  when  great  pressure 
was  brought  to  bear  upon  the  Board  to  coerce  it  to  do  its 
whole  duty.  A  comparison  of  assessments  of  the  great 
franchise  corporations  in  columns  two  and  three  of  Table 
VII  witli  the  others,  tends  to  support  the  declaration  of  the 
ex-Governor.  Since  the  mandamus  of  the  courts  in  1901, 
the  Board  has  increased  the  Pullman  Company  more  than 

-Proceedings  State  Board  of  Equalisation,  1888,  p.  81. 
3Reports  to  Gen.  Assembly,  1895,  vol.  I,  p.  24. 


101]  OBSERVATIONS   AND  DEDUCTIONS  101 

1100  per  cent,  on  its  1894  valuation;  it  has  raised  the 
People's  Gas  Light  &  Coke  Company  more  than  3900  per 
cent;  while  the  small  Quincy  Horse  Kailway  &  Carrying 
Company  has  been  increased  only  96  per  cent.;  the  St. 
Louis  National  Stock  Yards  has  been  increased  56  per 
cent.;  the  Urbana-Champaign  Railway,  Gas  Light  &  Elec- 
tric Company  has  been  increased  250  per  cent.  The  last 
named  may  be  largely  accounted  for  by  the  addition  since 
1894  of  the  railway  and  electric  business.  The  writer  does 
not  claim  that  these  items  prove  the  Board  to  be  in- 
efficient. But  they  are  straws  blowing  in  that  direction. 

Evidence  may  also  be  adduced  by  checking  the  Board's 
reports  with  those  of  the  Insurance  Superintendent  and  of 
the  Auditor  of  Public  Accounts.  For  example,  in  1901, 
the  very  year  when  the  most  pressure  was  brought  to  bear 
on  the  Board,  it  failed  to  assess  the  domestic  life  insurance 
companies  and  fell  far  short  of  the  proper  valuation  of  the 
domestic  fire  companies  which  it  did  assess.  From  the 
insurance  report  for  the  year  1901  the  following  facts  are 
deduced.  The  number  of  incorporated  fire  companies 
assessable  by  the  Board  was  six.  Their  admitted  ledger 
assets  over  and  above  liabilities,  amounted  to  the  sum  of 
$7,889,024.  At  a  14  per  cent,  valuation  their  property 
amounted  to  $1,104,463.  But  to  avoid  the  possible  error 
of  including  shares  of  national  banks  located  in  other 
states,  or  United  States  bonds  or  shares  of  stock  of  com- 
panies taxed  on  their  capital  stock  by  the  Board,  a  14  per 
cent  deduction  on  the  sum  of  such  property  is  due,  to  the 
amount  of  $186,163. 

This  deduction  leaves  $918,300  that  was  taxable  in 
1901.  Now  turning  to  the  Board's  report  for  1901  it  is 
seen  that  the  actual  assessment  was  much  less  than  that 
amount.  The  local  assessment  on  tangible  property  was 
$212,554,  the  Board's  "corporate  excess"  was  in  all  only 
$150,040,  a  total  of  $362,594.  This  was  more  than  half  a 
million  less  than  it  should  have  assessed  those  companies. 
It  looks  as  though  the  Board  let  the  fire  companies  off 
lightly.  Further,  from  the  same  insurance  report  the  fact 


102  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [102 

may  be  similarly  deduced  that  the  three  domestic  life  com- 
panies in  that  year  had  taxable  property,  at  a  14  per  cent, 
valuation,  to  the  amount  of  $198,648.  But  the  Board's  re- 
port contains  no  reference  whatever  to  those  companies. 
The  1902  insurance  report  shows  that  only  one  paid  a  tax. 
That  was  a  Chicago  company  that  paid  about  $3,000.  At 
a  five  per  cent,  rate  of  taxation  this  would  give  that  com- 
pany a  valuation  of  only  $60,000.  It  might  reasonably  be 
expected  that  an  efficient  Board  would  assess  these  com- 
panies something  at  least. 

Turning  now  to  the  Auditor's  report  for  1906,  we  find 
that  there  were  three  Illinois  trust  companies  which  were 
not  organized  under  the  banking  laws  but  under  the  gen- 
eral incorporation  law,  and  hence  taxable  by  the  Board. 
It  did  value  one  of  them,  the  Illinois  State  Trust  Company, 
of  Springfield;  but  it  did  not  find  that  the  company  was 
worth  any  more  than  the  local  assessor  had  valued  it, 
namely,  $56,000.  Now  by  a  process  similar  to  that  used 
in  the  case  of  the  insurance  companies  just  discussed, — 
that  is  by  throwing  out  all  the  stocks  and  bonds  lest  some 
should  be  stock  of  national  banks  located  in  other  states  or 
U.  S.  bonds  or  stocks  of  companies  taxed  by  the  Board  on 
capital  stock, — it  can  be  shown  that  the  Illinois  State 
Trust  Company  under  inspection  of  the  Auditor,  was 
worth,  at  a  14  per  cent,  valuation,  $194,865.  Thus  it  ap- 
pears that  the  Board  might  have  assessed  this  company 
nearly  $150,000  "corporate  excess."  But  it  did  worse  than 
that  in  the  case  of  the  other  two  trust  companies.  The 
Chicago  Title  &  Trust  Company  had  a  capital  stock  of 
$5,000,000  and  undivided  profits  of  $1,113,515.89.  The 
Equitable  Trust  Company  had  a  capital  stock  of  $500,000 ; 
a  surplus  in  the  sum  of  $500,000 ;  and  undivided  profits  of 
$30,796.  The  first  had  resources  of  $6,116,245 ;  the  second, 
of  $5,836,037.  But  no  trace  of  any  action  by  the  Board  in 
regard  to  either  of  these  companies  is  discernible  in  their 
report. 

If  insurance  companies  and  trust  companies,  which  can 
be  located  and  can  be  valued  by  aid  of  the  official  reports 


103]  OBSERVATIONS  AND  DEDUCTIONS  103 

of  the  Superintendent  of  Insurance  and  of  the  Auditor, 
are  not  all  assessed ;  and  if  those  that  are  assessed,  are  im- 
properly assessed  by  the  Board  even  after  a  severe  casti- 
gation  by  the  Supreme  Court;  what  may  be  concluded  as 
to  its  efficiency  in  general  as  an  assessor  of  corporations? 
After  giving  the  Board  the  benefit  of  every  doubt  in  the 
statistical  discussion,  these  facts  together  with  those 
brought  out  in  the  discussion  of  the  mandamus  action 
against  the  Board  in  1901,  force  a  conclusion  in  the  nega- 
tive. The  board  has  not  proved  to  be  an  efficient  body  for 
the  assessment  of  corporations. 

Before  venturing  to  suggest  a  remedy,  it  may  be  well 
to  summarize  the  legal  decisions  and  the  deductions  from 
the  investigation  of  the  workings  of  the  system. 

1.  We  have  seen  that  the  capital  stock,  within  whose 
valuation  are  considered  bonds  and  franchise,  is  in  the  ag- 
gregate held  to  be  personal  property  taxable  to  the  corpor- 
ation. 

2.  We  have  seen  that  national  banks  cannot  be  taxed 
on  their  capital  stock. 

3.  We  have  seen  that  certain  classes  of  corporations 
are  taxable  on  both  their  tangible  property  valuation  and 
a  "corporate  excess"   valuation  which  is  determined  by 
deducting  the  value  of  locally  assessed  tangible  valuation 
from  the  assessed  and  equalized  capital  stock,  debt  and 
franchise  valuation ;  also  that  shares  of  stock  of  such  cor- 
porations are  not  taxed  to  the  holders  thereof. 

4.  We  have  seen  that  for  years  certain  classes  of  cor- 
porations have  been  exempt  from  taxation  on  their  capital 
stock  on  the  supposition  that  it  is  constitutionally  allow- 
able thus  to  favor  certain  business  enterprises. 

5.  The  decisions  of  the  Supreme  Court,  however,  hold 
that  no  capital  stock  can  be  by  law  exempt  from  taxation. 
And  if  the  case  came  up  no  doubt  the  Supreme  Court  would 
hold  that  no  shares  of  capital  stock  can  be  exempt  from 
taxation  even  though  the  capital  stock  be  assessed  by  the 
Board  of  Equalization.     For  the  Court  has  held  that  the 
aggregate  of  capital  stock  is  distinctly  property  of  the 


104  TAXATION  OF  CORPORATIONS  IN  ILLINOIS  [104 

corporation;  while  shares  of  stock  are  distinctly  property 
of  individuals.  The  constitution  does  not  provide  that  any 
such  property  can  be  exempted  by  the  legislature ;  and  the 
courts  have  overruled  every  other  consideration  in  holding 
that  no  property  may  be  exempted  by  the  legislature  which 
is  not  specifically  permitted  by  the  exemption  clause  of 
the  constitution. 

The  situation  in  the  state  to-day,  then,  stands  as  fol- 
lows. The  capital  stock  and  franchise  of  every  business 
corporation  (except  national  banks)  is,  under  the  present 
revenue  system,  as  construed  by  the  courts,  assessable 
either  by  the  Board  of  Equalization  or  by  the  local 
assessor.  Of  those  that  are  left  to  the  local  assessor,  we 
have  seen  that  while  banking  corporations  with  an  admir- 
ably well  worked  out  system  of  listing  their  property,  are  in 
recent  years  assessed  more  than  other  classes  of  corpora- 
tions, the  heretofore  exempted  classes  of  corporations,  the 
"purely  manufacturing,  mercantile,  coal  mining  and  sell- 
ing, printing,  publishing  and  stockbreeding"  companies, 
are  especially  difficult  for  the  local  assessor  to  assess 
on  capital  stock,  as  no  provision  in  the  revenue  law 
gives  him  power  to  command  information  from  the 
companies.  Of  those  corporations  which  still  remain 
subject  to  the  assessing  power  of  the  Board,  it  has 
just  been  shown  that  they  are  more  or  less  inefficiently 
assessed.  The  main  causes  of  this  failure  of  the  system 
that  have  been  brought  out  in  this  study  are  two,  namely, 
(1)  the  failure  of  the  Board  to  secure  data  for  the  valua- 
tion of  corporations,  and  (2)  the  failure  of  the  Board  to 
do  its  whole  duty.  Finally,  the  general  conclusion  of  the 
whole  study  of  the  taxation  of  corporations  in  Illinois, 
other  than  railroads,  since  1872,  is  that  they  are  not  prop- 
erly taxed  under  the  present  system. 

Now  the  writer  ventures  to  suggest  a  remedy.  It  is 
not  advocated  that  revolutionary  measures  must  be  taken. 
But  as  long  as  the  value  of  property  is  held  to  be  the  test 
of  ability  for  sharing  tax  burdens,  and  as  long  as  state  and 
local  revenues  are  levied  on  the  same  assessment  basis,  this 


105]  OBSERVATIONS  AND  DEDUCTIONS  105 

"corporate  excess"  method  must  be  improved.  Properly 
worked  it  would  bring  all  competing  corporations  be- 
fore the  same  assessing  body,  where  each  could  be  taxed 
as  a  going  concern  by  the  same  rules.  If  the  Board  we 
have  were  at  work  the  year  round,  with  power  to  assess 
the  tangible  property  of  corporations,  and  with  power  to 
compel  the  production  of  corporation  books  and  papers, 
no  doubt  the  present  plan  might  work  more  effectively. 
But  the  number  of  members  makes  the  Board  unwieldly; 
while  the  method  of  election  by  districts  gives  no  assur- 
ance of  either  special  qualifications  or  of  any  real  responsi- 
bility, which  are  necessary  to  secure  efficiency.  A  small 
body  of  experts  appointed  by  the  Governor  would  occupy 
such  a  position,  especially  if  their  term  of  office  were  that 
of  "good  behavior".  The  work  and  the  reports  of  such  an 
assessing  body  must  be  an  open  book  to  the  public.  To 
provide  for  this,  the  general  forms  and  procedure  in  the 
collection  of  data,  the  use  of  the  same  and  the  statistical 
reports  of  the  same  as  well  as  all  the  reports  of  the  special 
proceedings  of  the  state  assessing  body,  must  be  mapped 
out  for  that  body.  The  general  assembly  is  not  the  agency 
to  work  out  such  detailed  regulation.  It  is  a  special  work 
for  a  commission  made  up  of  masters  in  the  theory  of  tax- 
ation and  of  experts  in  the  business  methods  of  corpor- 
ations. 

Such  a  small  board  of  experts  as  is  here  proposed, 
has  been  recommended  by  the  Special  Tax  Commission,  in 
its  report  submitted  to  the  general  assembly  by  Governor 
Deneen  in  1911.  Governor  Dunne  in  his  inaugural  ad- 
dress has  also  urged  the  abolition  of  the  State  Board  of 
Equalization,  and  the  creation  of  a  permanent  State  Tax 
Commission,  to  exercise  its  functions  and  to  have  general 
supervision  over  the  administration  of  the  revenue  laws. 


BIBLIOGRAPHY 
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Springfield,  1870. 

Laws  of  Illinois,  Public  and  Special,  1843-1909.    Springfield. 

Kurd's  Revised  Statutes  of  Illinois.    Chicago,  1908. 

House  Journal,  1830-1903.     Springfield. 

Senate  Journal,  1830-1903.    Springfield. 

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1906. 
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in  Quarterly  Journal  of  Economics,  XIX,  498. 
Seager,   H.   R.,    Introduction   to   Economics,    (third   edition   revised   and 

enlarged)  N.  Y.  1006. 
Seligman,  E.  R.  A.,  Essays  in  Taxation.    N.  Y.,  1895. 

Pending    Problems    in    Public    Finance.      Pamphlet. 

N.  Y.     1904. 

Franchise  Tax  Law  in  New  York,  in  Quarterly  Jour- 
nal of  Economics.    XIII,  445. 
106 


INDEX 

Altgeld,  Governor,  42,  92,  100. 

American  Biscuit  and  Manufacturing  Company,  70. 

Assessment  of  corporations  by  local  assessors,  10-11;  by  State  Board  of 
Equalization,  10-12. 

Assessment  of  banking  corporations,  55-62 ;  bank  stock  tax,  law  of  1857, 
56 ;  change  made  by  law  of  1867,  57 ;  debate  on  in  constitutional  con- 
vention, 58;  tangible  property,  59-60;  Bureau  of  Labor  Statistics. 
60-61 ;  Special  Tax  Commission  of  1910,  61. 

Assessment  of  business  corporations  exempt  from  jurisdiction  of  State 
Board  of  Equalization,  54-72 ;  foreign  corporations,  54 ;  banking  cor- 
porations, 55 ;  companies  organized  for  certain  purposes,  62-70 ;  his- 
torical development,  64;  wording  of  charter,  test,  68;  a  list  of  such 
companies,  70;  inequality  apparent,  70;  homestead  loan  associations, 
70-72. 

Assessment  of  inter-state  corporations,  22,  23,  54. 

Assessments  by  State  Board  of  Equalization,  tabulated,  93-96. 

Attorney-General,  25,  26,  32,  34,  66;  opinion  on  coercive  power  of  State 
Board,  25,  26;  hostility  to  undervaluation,  32,  34;  as  to  jurisdiction  of 
Board,  66. 

Auditor  of  Public  Accounts,  17,  26,  48,  58,  68;  member,  ex-officio,  of  State 
Board  of  Equalization,  17 ;  reports  neglect  of  corporation  to  comply 
with  law,  26;  certifies  "corporate  excess"  to  county  clerks,  47;  reports 
resistance  of  corporations  to  tax,  48;  reports  escape  of  special  charter 
banks,  58-59 ;  comments  on  inequality,  68. 

Banks,  55-62,  73~75- 

See  Assessment  of  banking  corporations. 

Bonds,  or  funded  debt,  24. 

"Blank  No.  5,"  24. 

Building  and  Loan  Associations,  70-72. 

Bureau  County  Board  of  Supervisors,  32. 

Bureau  of  Labor  Statistics  on  bank  taxes,  60-61 ;  on  efficiency  of  State 
Board  of  Equalization,  98. 

Capital  stock  tax  defined,  8,  52. 

Capital  Stock  Committee  of  State  Board  of  Equalization,  27,  28-29,  43-46, 
38-39,  41,  42,  44,  46,  66. 
See  State  Board  of  Equalization. 

Colburn,  on  undervaluations,  35. 

Collection  of  corporation  taxes,  47-53 ;  local  collectors,  47 ;  county  collec- 
tor for  part  of  telegraph  company  tax,  47;  collection  at  source,  56,  59. 
See  also  Fees. 

Collection  resisted  by  attacking  validity  of  law,  48;  use  of  injunction,  48; 
ruling  as  to  use  of  injunction,  49;  decisions  on  validity  of  law  and 
legality  of  assessments  by  Board  of  Equalization,  50-53. 
See  also  Court  Decisions. 

107 


108  TAXATION  OP  CORPORATIONS  IN  ILLINOIS  [108 

Conclusions,  46,  60,  69,  92-105. 

Constitutionality,  50-53,  83,  84. 

Constitutional  provisions,  9,  64. 

Cooley,  T.  M.,  on  franchise  tax,  51. 

Corporate  excess  defined,  10,  n,  15,  19. 

Corporations  classified,  showing  taxes,  fees,  etc.,  paid  by  each  class,  13-15. 

Corporation  tax  defined:  Professor  Seligman's  definition,  7,  8;  court  de- 
cisions, 7,  8,  26;  Judge  Grosscup's  "capitalization  of  net  earnings,"  40. 

Court  decisions  as  to  uniformity,  32-34;  as  to  equality,  37;  compelling  hon- 
est assessment,  the  Teachers'  Federation  suit,  36-41 ;  validity  of  rev- 
enue law,  48;  legality  of  action  of  State  Board  of  Equalization,  48-53; 
injunctions,  49;  validity  of  gross  and  net  receipts  taxes,  82,  84;  valid- 
ity of  "reciprocal  tax,"  87. 

County  clerk,  20,  24. 

Cullerton,  on  merger  companies,  23. 

Difficulties  in  assessing  corporations,  5,  6,  24,  25,  26;  Board  lacks  power 
to  compel  corporations  to  furnish  data,  25;  statistical  table  showing 
character  and  lack  of  data,  28-29. 

Edsall,  James  K.,  Attorney-General,  66,  68. 

Exemptions  from  all  taxation,  14;  from  assessment  on  capital  stock  by 
State  Board,  52-72 ;  by  other  states,  63 ;  debate  in  constitutional  con- 
vention, 64;  Manufacturers'  Association,  66;  decision  of  1908,  67;  in- 
justice of,  68,  70. 

Dunne,  Governor,  recommendation  of,  105. 

Fees,  licenses  and  retaliatory  taxes,  73-91 ;  prior  to  1872  retained  by  cer- 
tain state  officers,  73;  merger  fees,  1872  to  1893,  73,  90;  general  incor- 
poration fees,  varying  for  class,  and  charges  sliding,  73-75;  statisti- 
cal table  of,  90-91 ;  examination  fees  for  state  banks  and  savings 
banks,  75;  on  corporations  not  chartered  for  pecuniary  profit,  74; 
insurance  incorporation  fees,  domestic,  78-79 ;  filing  of  declaration  and 
charter,  filing  and  declaration  of  securities  by  foreign  companies,  78; 
filing  of  reports,  copies  of  policies,  certificates,  etc.,  78-79;  retaliatory 
fees,  licenses,  taxes,  86;  enforcement  begun,  87;  validity  sustained,  87; 
productivity  of,  88,  89;  revenue  from,  Table  IV,  91. 
For  net  and  gross  receipts  tax,  see  Insurance  Companies,  General 
Property  Tax  of. 

Fire  Insurance  Companies,  see  Fees,  Licenses,  and  Insurance  Companies. 

Foreign  corporations,  22,  54,  55,  80,  87. 

Franchise  tax  defined,  8,  51;  city  tax  on  franchises,  16;  general  property 
tax  on,  19. 

Fraudulent  assessment,  39,  53. 

General  property  tax,  5,  6,  7,  8,  9,  n,  15,  21,  31,  51,  57,  60,  63,  64,  67,  68, 
71,  72,  76,  77,  82,  84,  loo,  103,  104. 

Gottfried  Brewing  Company,  70. 


109]  INDEX  109 

Grosscup,   Judge,   injunction,   40-41 ;    overrules   state   supreme   court,   41. 

Gross  receipts  tax,  82-83. 

See  Insurance  Companies. 

Hand,  Justice,  opinion  of  Illinois  Supreme  Court  in  mandamus  suit,  38. 

Hearn  on  "Sworn  Statements,"  27. 

Illinois  Steel  Company,  70. 

Incorporated  charities,  14. 

Inequality,  34,  35,  41,  51,  68,  70. 

Ingersoll,  R.  G.,  argues  that  revenue  law  violates  I4th  amendment,  51. 

Injunctions,  49,  57. 

Insurance  Companies  :  fees,  licenses,  etc.,  78-79,  86-89,  Qi  \  general  proper- 
ty tax  of  domestic  companies,  75;  fraternal  benefit,  76;  life  companies 
favored,  76-77;  undervaluation,  101,  net  receipts  tax  of  all  for- 
eign companies  except  life,  80-84;  originated  as  license  tax,  80; 
"commerce  clause"  invoked,  81 ;  changed  to  gross  receipts  property 
tax  in  1853,  82,  83;  took  present  form  in  1869,  85;  definition  of  by 
court,  84;  "reciprocal  taxes,"  section  of  law  authorizing,  86;  real 
meaning,  retaliation,  87;  Auditor  Swigart  begins  enforcement,  87; 
revenue  produced,  88,  89;  validity  sustained,  87;  revenues  from  in- 
surance companies,  91. 

Intangible  personal  property,  5,  II,  25. 

Jurisdiction  of  State  Board,  22,  23. 

Lewis,  J.  Hamilton,  Chicago  Counsel,  42. 

Laundry  Companies,  70. 

License  fees ;  See  Fees,  licenses,  etc. 

Life  Insurance  Companies,  76,  77,  78;  special  fee  of  foreign  companies 
on  each  $1000  of  policies,  79. 

Limitations  on  taxing  corporations,  10. 

Lippincott,  C.  E.,  17,  18,  22. 

Listing  of  property,  n. 

Local  assessments,  n. 
See  Assessor. 

Local  license  fees,  82-83. 

Manufacturers'  Association  asks  exemption  from  capital  stock  tax,  66. 

Mercantile  companies,  13,  62,  66-67. 

Miller,  Justice,  opinion  United  States  Supreme  Court  on  tax  injunction 
cases  involving  constitutionality  of  revenue  law,  49. 

Mining  companies,  13,  62,  66. 

National  banks,  55,  57. 

Number  of  companies  taxed  on  capital  stock,  15,  28-29. 

Organization  fees:  see  Fees. 

Palmer,  Governor,  18. 

Personal  property  tax,  21. 

See  Assessment  and  General  Property  tax. 


110  TAXATION  OP  CORPORATIONS  IN  ILLINOIS  [110 

Porter  vs.  R.  R.  I.  &  St.  L.  R.  R.  Co.,  48. 

Printing  and  Publishing  Companies,  13,  62. 

Public  Service  corporations,  16. 

Pullman  Company,  41,  42,  96,  99. 

Real  Property,  11,  47. 

Revenue  Law  quoted  verbatim,  26,  29,  65,  71,  85,  86. 

Revenues  from  corporation  taxes,  75,  97,  88,  90,  91. 

Savings  banks  :     see  Banks. 

Seager,  H.  R.  opinion  on  method  of  determining  "corporate  excess,"  31. 

Secretary  of  State,  69. 

Seligman,  E.  R.  A.,  defining  corporation  taxes,  7,  55. 

Special  Tax  Commission  of  1910  on  bank  taxation,  61-62;  recommends 
permanent  State  Tax  Commission,  105. 

State  Banks,  73,  75. 

State  Board  of  Equalization :  origin  of,  17 ;  its  influence  on  framing  of 
the  revenue  law,  18-19;  its  duties  and  limitations,  10-12;  its  jurisdic- 
tion, 17,  19,  22,  23,  54,  55,  62,  70;  its  power  to  get  data,  25,  26,  27; 
its  difficulties  in  securing  data  shown  by  Table  I,  28-29;  its  rule  used 
in  determining  "corporate  excess,"  29-31,  52;  its  unwritten  rule  of 
undervaluation,  31-36;  conflicting  legal  decisions,  32,  33;  new  rule 
adopted  in  1900,  37;  compelled  to  retain  old  rule  by  mandamus  ac- 
tion brought  by  Chicago  Teachers'  Federation,  38-41 ;  Judge  Gross- 
cup's  injunction,  40-41 ;  Capital  Stock  Committee's  proposed  record 
book,  27;  why  railroad  capital  stock  taken  from  jurisdiction  of,  27; 
tabulated  reports,  28-29,  43-46;  fraud  in  assessment,  38-39;  reports 
of  committee  not  open  to  criticism  and  amendment  of  the  Board  as 
whole,  41,  42,  44;  deficiencies  in  its  report,  44;  character  of  closed 
committee,  46. 

Statistical  Tables,  28,  29,  45,  70,  81,  90,  91,  93,  96. 

Stocks  and  bonds,  12. 

Stockbreeding  Associations,  13,  62. 

Strike  fund  of  union  taxable,  15. 

Swigart,  Auditor,  87,  92. 

Sworn  statements  of  capital  stock  debt,  etc.,  20,  60. 

Tangible  property,  n,  47,  54,  60. 

Tax  Injunction  Cases  in  United  States  Supreme  Court,  49. 

Teachers'  Federation  mandamus  suit,  36-41. 

Telegraph  companies,  14,  15,  20,  22,  48,  54. 

Trust  companies,  102. 

Undervaluation,  32,  35,  36,  39,  53. 

CJnifornmy,  32,  33,  34,  37,  41,  51. 

United  States  Sugar  Refining  Company,  70. 

Valuation :    see  Assessment. 

Warner  on  "fair  cash  values,"  27. 

Western  Electric  Company,  70. 


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